How Mining Works - for Beginners

How Mining Works - for Beginners

Mining for beginners: if very simple

If you still do not understand anything about this, then such a comparison will help you put everything in order.

Mining is the guessing of a specific piece of code that is encrypted in a special way (in a hexadecimal system). In this case, the beginning of the code is known – this is the end of the previous piece of code (block). Thus, mining can be represented as the selection of a kind of digital puzzles. Who quickly found the right puzzle (that is, “guessed” the unknown block), and money.

And now “Mining” is more technical language

Mining is a process for the production of crypto-currency, which is “mined” by the miners – network participants performing special tasks. Consider mining on the most famous crypto currency at the moment – bitcoin.

Bitcoin is extracted by verifying current and all previous transactions and including them in the block chain. Transaction data is hashed (encrypted) and entered into a new block in the block system.

How do you create new coins?

New coins (coins) are issued in circulation when the block is closed.

Thus, the issue of bitcoin-coins is also a reward for the miners for maintaining the working capacity of the entire network and ensuring its stability. The reward is given to those who managed to pick up the secret key (hash) which is the key to closing the block.

How to prove that I worked?

This procedure ensures the transparency of the work of the miners, and the proof of work itself provides the proof of work.

This method guarantees verification of the execution of calculations by a specific miner (network node).

At the heart of bitcoin’s success lies this “proof of work”.

First: proof of work does not allow miners to create bitcoins from the air;

Secondly: does not allow the user to hold one bitkoyn twice – solves the problem of re-payment already used coin;

Thirdly, it associates the entire history of bitcoins, which means that if an attacker wants to change a transaction that occurred in the past, he will have to replace the hash of all previous transactions and those following him, and this fraud can not be performed.

And what if someone also picked up the key …

The question arises – what happens if the key selects several miners simultaneously? In this case, only the person who made it first is rewarded. In turn, you can increase the chances of success by having powerful computing resources – equipment.

Evolution of equipment for mining

In the beginning, it was quite simple to do the job, with this task an ordinary home computer was doing quite well, but as soon as computers that were increasing the crypto currency became larger, competition increased and it took more computing power to “get” a coin. So gradually there was a need to use powerful video gaming cards, and now for the maximum speed of calculations there is a specialized equipment (ASIC).

This is due to the fact that the system is built to increase the complexity of computing every 2016 blocks, which takes about 2 weeks. This solution protects bitcoin from inflation. Another feature is a regular planned reduction in the remuneration, it is a twofold decrease. When creating bitcoin, the reward was 50 bitcoins, in 2012 it dropped to 25 bitcoins, and the current figure of 12.5 bitcoins was reached in 2016. To monitor such drops, there are bitcoins clocks.

Are the bitcoins over?

Initially, in 2009, Satoshi Nakamoto (pseudonym of the creator or creators of crypto currency, bitcoin) laid down the maximum emission limit.
The bitcoin protocol provides that the mining in the form to which we are all used will end when the last 21 million coins are issued. It is estimated that this will happen somewhere in the middle of the next century, to be more precise, in 2140. After this threshold is reached – the currency will not cease to exist, it will still function, but new bitcoins will not enter the market.

In the end, what we have:

Considering all of the above, we see that the mining will exist at least until 2140, besides, experts say that the sharp fall of the crypto currency is very unlikely. Universal interest also gives a positive outlook – the number of miners is actively growing and is not going to reduce this trend.

Beginners at the moment have a huge number of options – how to organize their work, what role to play in the production of crypto currency, and what income to receive in the end.
In order to choose the ideal option for yourself – it is worth a thorough understanding of this, at first glance, complex issue. But we will prove to you that in fact it is quite simple.

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