Bitcoin mining: Things you should know

Bitcoin mining: Things you should know

Bitcoin is one of the most popular types of currency today. You can buy, sell, and trade this cryptocurrency, but what many people don’t know is that you can also create cryptocurrency. This is a process known as Bitcoin mining. To put it simply, Bitcoin mining involves activities that add transactions to a ledger. So, with this process, you are able to confirm that sufficient amount of effort is made to a block. With the help of mining, you will add new Bitcoins in a block.

In order to mine Bitcoins, you must take a closer look at all the transactions that are part of a block and verify the validity of these transactions. After that, you have to choose the latest transactions located in the header of the latest block and place them into a brand new block in the form of a hash.

Prior to adding a new block to the blockchain, users must solve the proof of work problem. In case you didn’t know, these problems are created to make sure that the latest block that is about to be made is real and the information used in its creation meet the pre-arranged requirements. Bitcoin relies on so-called hashcash proof of work, This means that if you want to solve a problem, you must build a hash.

Building a hash

In case you are familiar with the procedure, you can confirm that it’s quite simple to create a hash from a set of bitcoin blocks. What’s complicated is that users can’t process the data by checking at the hash – they have to check different blocks. These hashes are located at the blocks and users must combine these hashes to prove that the data is legit. Some people are trying to forge this data, but this is a bad idea because manipulations like this are easy to spot.

Once you solve a proof of work, you will get a reward. For your effort, you will get a certain amount of bitcoins which is related to a few different things mostly to the complexity of the problem you solved. In case you want to earn many bitcoins, you must solve dozens of problems. Obviously, you have to use powerful computers to solve these problems. Many Bitcoin miners are creating so-called mining pools in order to join forces and share the rewards in the end.