About Mining Bitcoin And Other Digital Currencies
If you haven’t been living under a rock for the past few months, you must have heard of the digital currency revolution led by Bitcoin. As you may know, Bitcoin is the most popular and most valuable digital currency in the world. Bitcoin mining has created a number of instant millionaires. This digital coin that has gained a lot of popularity over the past few years has a very interesting history. It is still early in terms of the typical time that at takes the general population to adopt a new technology.
First and foremost, nobody knows the originator of this digital currency. There are several other unique things about Bitcoin. One of them is that only a limited amount of this currency can be mined or generated. The upper limit on mining this digital currency is close to 21 million which means only 21 million Bitcoin can be mined. Due to the popularity of this digital currency, a number of other digital currencies have also come into vogue. These other digital currencies are usually known as altcoin which is a catchall term for other cryptocurrencies that are based on technology similar to bitcoin.
Over the years, a number of other digital currencies have also gained a lot of popularity and there are a number of exchanges where you can exchange Bitcoin as well as with other digital currencies for various other digital currencies or fiat currencies. While Bitcoin and other digital currencies have gained a lot of popularity but it is also a fact that most people who have heard of Bitcoin do not understand the technology behind bitcoin and other digital currencies. Specifically, people find it hard to wrap their head around the concept of mining or generating these currencies. In the article below, we will try to explain how Bitcoin mining works and how you can also mine Bitcoin as well as other digital coins in order to become a part of this new digital currency revolution.
Before we begin to dig into Bitcoin mining, you first need to understand the concept of a blockchain. The blockchain is the underlying technology and Bitcoin is an application built on top of the technology. In simple terms, a blockchain may be defined as a distributed database that can be accessed by anyone since it is a public database. This database consists of all the transactions that have been confirmed on this network.
Whenever a Bitcoin transaction happens, it becomes part of a public ledger which is known as blockchain. All the nodes in this peer-to-peer network have a copy of this digital ledger which prevents double spending. So, if a person has only 20 bitcoin in their wallet, and they send 6 to someone else which means they have only 14 coins remaining in that wallet, the blockchain technology prevents them from sending 15 Bitcoin from that address to someone else. This is due to the fact that this public ledger contains all the transactions, meaning it has balances of all the Bitcoin wallets.
The biggest challenge that comes with maintaining such a large public ledger is that it needs to be trustworthy and it needs to be seen everywhere. In other words, this digital ledger should not allow anyone to make a fraudulent transaction otherwise the concept of Bitcoin will fail. This is the problem that was resolved by the inventor of Bitcoin.
Satoshi Nakamoto, the inventor of Bitcoin, accomplished this seemingly impossible task with the help of public key cryptography. This process requires huge computing power and the genius of Satoshi Nakamoto lies in the fact that he devised Bitcoin in such a way that people who mine Bitcoin are given the incentive of discovering or mining this currency when they participate in the transaction verifying network. In simple terms, bitcoin is mined or generated by the system when miners do the mathematical calculations that are needed to make sure no fraudulent transaction is recorded in the blockchain.
As far as mining Bitcoin is concerned, bitcoin is generated using the cryptographic algorithm known as SHA – 256. There are several other digital coins that use this algorithm. One of the unique things about this algorithm is that it’s almost impossible to break this algorithm using brute force which means this algorithm provides a very high level of security. This is a very processing heavy algorithm but it’s not memory heavy which means specific hardware can be used to generate bitcoin.
Several other scripts are used for generating other digital coins. For instance, Scrypt is a derivation function that is used for generation of Litecoin. Similarly, there are a number of other algorithms that are used for generation of other types of digital coins. However, it is important to keep in mind that almost all the digital coins that are in vogue today are based on the basic technology used by Bitcoin.
Since Bitcoin has risen so much in value over the past year, a number of companies have jumped in the business of mining Bitcoin. There was a time when anybody with a laptop or a powerful desktop computer could discover or mine Bitcoin. However, those days are long gone. These days, Bitcoin is a generated by huge server farms that use thousands of processors in a warehouse.
Keep in mind that these companies use specialized hardware that has been specifically designed to mine Bitcoin as well as other coins. Therefore, it is almost impossible for an individual to generate or mine Bitcoin on their own. However, there are hundreds of other digital coins that can be still be mined by an individual user. To mine these coins, you will need to download a specific software and run it on your system in order to generate digital coin.
If you want to mine digital coin, you have the option to mine on your own or you can participate in a mining pool. Keep in mind that when you are mining digital currencies, the system doesn’t generate these coins in a gradual flow. The digital coins are generated in big chunks whenever a particular mathematical problem is solved. It’s possible that you might never hit that milestone and get the reward from the algorithm.
On the other hand, when you mine as part of a mining pool, all the rewards given by the system are distributed to all the participants of the mining pool in a proportion of the processing power contributed by them. Therefore, it is better to become part of a mining pool if you want to generate digital coins.
You can find active communities for various mining pools for different currencies online. So, choose a coin that is of interest you and then join a popular mining pool in order to mine digital coin.