Bitcoin mining confuses most of the people at first, especially those who do not have technical backgrounds, or may have been getting an ‘F’ all their lives in computer organization. Many potential users simply give up on Bitcoin, just because they don’t get its technicalities, which originates the fear of loss eventually.
At ForexMinute.com, we decided this time to design a tutorial about ‘Bitcoin mining’ that is easily understandable also by those who are complete novices. This is the part one of a long series that will guide you elaborately about Bitcoin, its mining and trading procedures as well.
This part will simply provide you the basic details in the form of Frequently Asked Questions.
Here is the list of questions which we will cover in this section.
1. What is Bitcoin Mining?
2. What is the incentive to produce something as complicated as a Bitcoin block?
3. Do I need to buy a pick and shovel to start “mine”?
4. How many Bitcoins I get every time I find a block?
5. How often one discovers a block?
6. How is the computing power of a miner measured?
7. What is the difficulty to find a block?
8. How often do you change the difficulty?
9. What are Mining Pools?
10. What is a “Rig”?
11. What is mining with GPU?
12. What is mining with CPU?
Q1: What is Bitcoin Mining?
Generating Bitcoin is called Mining – a term that refers to the mining of precious metals. Bitcoin Mining is the process by which “blocks” of a “chain”, whose purpose is to verify the legitimacy of previously conducted transactions. Adding a new block to the chain is a difficult process that requires a lot of computing power.
Q2: What is the incentive to produce something as complicated as a Bitcoin block?
This is the interesting part: whoever is the first to “produce” (find) a new block will receive Bitcoins as a reward for their work. From the point of view of the network, miners provide security to the system by verifying previously conducted transactions, eventually taking credit for preventing computational errors. This is all done automatically by a special mining software; units. A normal user should only worry about pressing the button “mine”.
Q3: Do I need to buy a pick and shovel to start “mine”?
Bitcoin Client is the answer here. Initially just a common computer and the same program used to manage the Bitcoin wallet was needed. Today, as we shall see, the process became a bit more complicated and specialized, but still within reach of anyone with access to a computer with a good graphics card.
Q4: How many Bitcoins I get every time I find a block?
Currently, the reward for finding a block is 25 Bitcoins. This amount is likely to shrink by about half every 4 years.
Q5: How often one discovers a block?
The Bitcoin network creates and distributes a batch of new Bitcoins approximately every 10 minutes. The probability that a user will receive a lot depends on the computing power that he is bringing in relation to the sum of the computing power brought by all the miners.
Q6: How the computing power of a miner is measured?
The computational power of a miner is measured in Mega Hashes per second, and the ability to produce these is called Mega Hashes Hash Rate.
Q7: What is the difficulty to find a block?
It’s simple: if you were the only miner, then your chance of finding the next block would be 100%. But if there are around 10 miners (all with equal power Hashes), the probability of finding the next block for each, would be 10%. So, the difficulty would be higher.
Q8: How often do you change the difficulty?
It’s a good question, because intuitively one imagines that the difficulty would be in constant change, accompanying permanent oscillations in the power of hash networks. But the reality is that that the system is designed to change the difficulty every 2016 blocks, i.e. every 2 weeks.
Q9: What is Pool Mining?
Due to the high difficulty today, a great hash power is necessary to have a reasonable chance of finding a block. That is why, the miners has started to group together and combine their computing power to increase the likelihood of being benefited. Whenever a group of miners mines a block, the reward is distributed among its members in proportion to the power of hash contributed by each. These groups are called mining pools.
Q10: What is a “Rig”?
The Mining Rigs (or mining equipment) are special computers that are used to mine Bitcoins.
Q11: What is GPU Mining?
GPU Mining is the process by which a video card is used as a source device to produce Bitcoins. Mining GPU has become the main way to generate Bitcoins, because of the power of Floating Point Operations Per Second (FLOPS) possessing these graphics cards.
Q12. What is CPU Mining?
CPU Mining is the process by which a processor is used to mine Bitcoins. This was the most common form of mining in the past, but fell into disuse with increasing difficulty to mine Bitcoins.
To contact the writer of the tutorial: Yashu Gola at email@example.com
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