While trading remains a popular way of earning cryptos, some get into the process’s depth, and the results are more rewarding. Mining is a process of extracting things out of the earth, such as gold mining which means extracting gold from the earth. However, gold and bitcoin are two completely different things in terms of their form of existence. Gold is a metal with a physical appearance, and you can bring it out physically from the earth with the right equipment. In contrast, bitcoin is a totally digital money. It is a digital coin that has no physical appearance. Bitcoin can just be in the form of digital data that could be a combination of numbers and alphabets.
Bitcoin Mining:
The process of creating new bitcoins from the bitcoin network to bring them into circulation is called bitcoin mining. Hash puzzles, these are complex problems that need special skills and computers to solve the problem and the miner executes the same. You can resemble bitcoin mining with gold mining in some aspects. Thar are-
- Like gold mining, bitcoin mining is also done with the help of some equipment. Here the equipment is computers with high power, electricity, and internet connectivity.
- In bitcoin mining, the computers perform to find new bitcoins. The computational power is used to generate trillions of hash numbers to solve a target hash number. If the miner successfully finds out the target hash number new bitcoins will be released. Same in bitcoin mining the mining equipment and the miners work to find out new gold in the mine.
- One more thing is just like gold is limited on the earth, bitcoin is also finite in number, which is 21 million. Within which over 19 million bitcoins are there that have been previously mined and the left amount is around 2 million. So, like gold, bitcoin is also limited in supply and so they both are high in demand.
These are some similarities of what bitcoin is compared to gold; it is also called digital gold. And for these reasons, creating new bitcoins is also called bitcoin mining.
The Detailed Mining Process:
Now, let’s understand the mining process in detail with the mathematical calculation included here. In the bitcoin mining process, there are six components or steps. They are-
- Version: This refers to the software version that facilitates the whole mining process.
- Timestamp: When the bitcoin transactions are recorded in the blocks of a Blockchain, they are stored with the exact transaction time.
- Previous block hash: This part contains the data of the previous block with a new hash number after it.
- Markle root: This is a tree-like structure where all the single hashed data are hashed together again.
- Difficulty target: The main mathematical calculation is done in this part. The difficulty target is a 64-digit hexadecimal number that is the main target that needs to be solved. The number includes some alphanumeric, with a bunch of zeros in the beginning. The miner, with the computational power, tries to solve it. Here, two criteria need to be fulfilled that indicate solving the puzzle.
- The result hash number must be the same or the closest smaller number of the difficulty target.
- Only the first miner who comes up with the first criterion will be counted as a winner because a lot of miners are working on the same target at a time.
The computers generate trillions of similar hash numbers that resemble the target hash number. And who meets the two criteria is the winner. That miner is then rewarded with new bitcoins that eventually come into circulation.
- Nonce: This is the last and most important level. When a miner fails to solve the given difficulty target, a new target is generated, and then the miner tries to solve it.
Conclusion:
Bitcoin mining is a well-practised method of making money by gaining new bitcoins, but it also needs a huge investment. Instead, a less expensive way to make money is bitcoin trading which is being done massively now. If you are also thinking of investing in this high-value digital coin to gain some profit, you can search for suitable trading options here and begin.
