Price...Global Vol....Diff.... How Bitcoin Mining Works
Where do bitcoins come from? With paper money, a government decides when to print and distribute money. Bitcoin doesn't have a central government.
With Bitcoin, miners use special software to solve math problems and are issued a certain number of bitcoins in exchange. This provides a smart way to issue the currency and also creates an incentive for more people to mine.
Bitcoin miners help keep the Bitcoin network secure by approving transactions. Mining is an important and integral part of Bitcoin that ensures fairness while keeping the Bitcoin network stable, safe and secure.
Currently, based on (1) price per hash and (2) electrical efficiency the best Bitcoin miner options are:
Bitcoin mining is the process of adding transaction records to Bitcoin's public ledger of past transactions or blockchain. This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place.
Bitcoin nodes use the block chain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
Bitcoin mining is intentionally designed to be resource-intensive and difficult so that the number of blocks found each day by miners remains steady. Individual blocks must contain a proof of work to be considered valid. This proof of work is verified by other Bitcoin nodes each time they receive a block. Bitcoin uses the hashcash proof-of-work function.
The primary purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus. Mining is also the mechanism used to introduce Bitcoins into the system: Miners are paid any transaction fees as well as a "subsidy" of newly created coins.
This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system.
Bitcoin mining is so called because it resembles the mining of other commodities: it requires exertion and it slowly makes new currency available at a rate that resembles the rate at which commodities like gold are mined from the ground.
A proof of work is a piece of data which was difficult (costly, time-consuming) to produce so as to satisfy certain requirements. It must be trivial to check whether data satisfies said requirements.
Producing a proof of work can be a random process with low probability, so that a lot of trial and error is required on average before a valid proof of work is generated. Bitcoin uses the Hashcash proof of work.
Bitcoin mining a block is difficult because the SHA-256 hash of a block's header must be lower than or equal to the target in order for the block to be accepted by the network.
This problem can be simplified for explanation purposes: The hash of a block must start with a certain number of zeros. The probability of calculating a hash that starts with many zeros is very low, therefore many attempts must be made. In order to generate a new hash each round, a nonce is incremented. See Proof of work for more information.
The Bitcoin mining network difficulty is the measure of how difficult it is to find a new block compared to the easiest it can ever be. It is recalculated every 2016 blocks to a value such that the previous 2016 blocks would have been generated in exactly two weeks had everyone been mining at this difficulty. This will yield, on average, one block every ten minutes.
As more miners join, the rate of block creation will go up. As the rate of block generation goes up, the difficulty rises to compensate which will push the rate of block creation back down. Any blocks released by malicious miners that do not meet the required difficulty target will simply be rejected by everyone on the network and thus will be worthless.
When a block is discovered, the discoverer may award themselves a certain number of bitcoins, which is agreed-upon by everyone in the network. Currently this bounty is 25 bitcoins; this value will halve every 210,000 blocks. See Controlled Currency Supply.
Additionally, the miner is awarded the fees paid by users sending transactions. The fee is an incentive for the miner to include the transaction in their block. In the future, as the number of new bitcoins miners are allowed to create in each block dwindles, the fees will make up a much more important percentage of mining income.
See the original post:
Everything you need to know about Bitcoin mining
- Google removes malware Android apps used to secretly mine bitcoin [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- Bitcoin exchange MtGox liquidated [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- Bitcoin Wannabe Litecoin Emerges as Low-Price Challenger [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- The Worlds First Bitcoin Debit Card Is Almost Here [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- How does Bitcoin work? - Bitcoin - Open source P2P money [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- Bitcoin - Wikipedia, the free encyclopedia [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- The Bitcoin Group #27 - China Bans Bitcoin Again - Politics - Dark Market - Bitcoin VC - Video [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- Edan Yago - Free Market Bitcoin regulation and Honduras free trade zones.mp4 - Video [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- Bitcoin vs. Political Power: The Cryptocurrency Revolution - Stefan Molyneux at TNW Conference - Video [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- Video: Roundup of This Week's Bitcoin News 25th April 2014 - Video [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- Bitcoin Fredagsbar med Torben Mark Pedersen - Video [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- Bitcoin and the Internet of Money - Video [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- Bitcoin for Dummies - Video [Last Updated On: April 26th, 2014] [Originally Added On: April 26th, 2014]
- Bitcoin runner-up Litecoin emerges as low-price challenger [Last Updated On: April 27th, 2014] [Originally Added On: April 27th, 2014]
- Bitcoin or Gold? Squawk Walk Taipei- Squawkonomics - Video [Last Updated On: April 27th, 2014] [Originally Added On: April 27th, 2014]
- Bitcoin Miner AntMiner S1 180 - 200 GH/s Nu in de Aanbieding! - Video [Last Updated On: April 27th, 2014] [Originally Added On: April 27th, 2014]
- New Bitcoin Documentary: Boom or Bust - Video [Last Updated On: April 27th, 2014] [Originally Added On: April 27th, 2014]
- Bitcoin May v0.9.1 GitHub Source Code Development Visualization - Video [Last Updated On: April 27th, 2014] [Originally Added On: April 27th, 2014]
- Atomic-Trade Bitcoin Exchange. AML, BSA, FinCEN compliant - Video [Last Updated On: April 27th, 2014] [Originally Added On: April 27th, 2014]
- China Bans Bitcoin Again -- Bitcoin the Movie -- Startup for Startups Raises 2,000 BTC - Video [Last Updated On: April 27th, 2014] [Originally Added On: April 27th, 2014]
- 4/24/14 - Xapo Debit Card, Russia's 1st Bitcoin Conference, Silk Road 2.0 - Video [Last Updated On: April 27th, 2014] [Originally Added On: April 27th, 2014]
- What is Bitcoin? - Video [Last Updated On: April 27th, 2014] [Originally Added On: April 27th, 2014]
- David Andolfatto, How Does Bitcoin Work? - Video [Last Updated On: April 27th, 2014] [Originally Added On: April 27th, 2014]
- Australian Bitcoin traders hit by crash [Last Updated On: April 28th, 2014] [Originally Added On: April 28th, 2014]
- Bitcoin traders hit by Mt.Gox crash [Last Updated On: April 28th, 2014] [Originally Added On: April 28th, 2014]
- Market Extra: Bitcoin venture capital money hasnt kept up with buzz [Last Updated On: April 28th, 2014] [Originally Added On: April 28th, 2014]
- Bitcoin price slips as China steps up regulation [Last Updated On: April 28th, 2014] [Originally Added On: April 28th, 2014]
- Bitcoin price slips on China regulation [Last Updated On: April 28th, 2014] [Originally Added On: April 28th, 2014]
- Win .33 Bitcoin ($150 or so, Depending on BTC value) - Meme game for May 1st - Take My Bitcoins - Video [Last Updated On: April 28th, 2014] [Originally Added On: April 28th, 2014]
- Ron Paul on Bitcoin - Video [Last Updated On: April 28th, 2014] [Originally Added On: April 28th, 2014]
- btc.sx Bitcoin derivatives platform George Samman clip - Video [Last Updated On: April 28th, 2014] [Originally Added On: April 28th, 2014]
- 'The Rise And Rise Of Bitcoin' Filmmaker: 'There Is No Answer Yet' [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- Bitcoin the movie: It just had to happen [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- Bitcoin Vies with New Cryptocurrencies as Coin of the Cyber Realm [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- The Bitcoin Meetup - BitcoinMKE Hosts Jeffrey Tucker - Video [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- MIT Bitcoin Expo 2014 - Video [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- Bitcoin Expo 2014: Fireside Chat with Dr Gavin Wood - Video [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- Rise Bitcoin Singapore - Video [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- Preview: Bitcoin Authenticator - 2FA for wallets - Video [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- The Bitcoin Group #27 (Live) - China Bans Bitcoin Again - Politics - Dark Market - Bitcoin VC - Video [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- 4/25/14 - More China uncertainty, Missourian bitcoin warning, BadLepricon malware - Video [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- Money & Tech at The Rise And Rise Of Bitcoin Afterparty - Video [Last Updated On: April 29th, 2014] [Originally Added On: April 29th, 2014]
- New Bitcoin student club at MIT will promote the virtual currency [Last Updated On: April 30th, 2014] [Originally Added On: April 30th, 2014]
- 4/29/14 - MIT Bitcoin Project, Mt Gox revival plan, Mastercard lobbyists & Team Rubicon - Video [Last Updated On: April 30th, 2014] [Originally Added On: April 30th, 2014]
- BitCoin Dentist GoCoin Fox News Interview - Video [Last Updated On: April 30th, 2014] [Originally Added On: April 30th, 2014]
- Bitcoin Foundation Election Hiccups -- Pathetic Ohio Bans Bitcoins -- Dogecon SF 2014 - Video [Last Updated On: April 30th, 2014] [Originally Added On: April 30th, 2014]
- Bitcoin Slips to $420 as BTC China Halts Transactions - Video [Last Updated On: April 30th, 2014] [Originally Added On: April 30th, 2014]
- MultiSig Plus BitCoin Multi Coin Wallet looks like HUGE INVESTMENT potential! - Video [Last Updated On: April 30th, 2014] [Originally Added On: April 30th, 2014]
- Bitcoin: what happens when the miners pack up their gear? [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- Dark Wallet Is About to Make Bitcoin Money Laundering Easier Than Ever [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- Bitcoin Talk Show #7 -- Skype BitcoinTalkShow to Call in Live! 🙂 - Video [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- Basic Bitcoin Bitches - Video [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- Gold standard vs Fiat vs Bitcoin - Truthloader - Video [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- How to Defund the System: Bitcoin vs. the Central Banksters - Video [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- Bitcoin, Anarchy and Freedom with Roger Ver - Video [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- MIT Goes Bitcoin-Wild [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- Bitcoin Weekly 2014 April 30: Bloomberg adds Bitcoin to their market index, MIT to produce campus-wide bitcoin ... [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- 'Dark Wallet' wants to make Bitcoin even harder to trace [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- Bitcoin made simple (video animation) - Video [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- Jon Matonis: Bitcoin - The future of commerce? - Video [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- $100 in Bitcoin Going to Every MIT Undergrad - Video [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- The Rise of Digital Currency - Video [Last Updated On: May 1st, 2014] [Originally Added On: May 1st, 2014]
- Money Goes Virtual: The Bitcoin Bourse - Video [Last Updated On: May 2nd, 2014] [Originally Added On: May 2nd, 2014]
- Bitcoin Lights with LIFX - Video [Last Updated On: May 2nd, 2014] [Originally Added On: May 2nd, 2014]
- Bitcoin: How We Got Here and Where We Are Going [Last Updated On: May 3rd, 2014] [Originally Added On: May 3rd, 2014]
- 5/1/14 - Larry Summers warns critics, Paym system & Bitcoin Center NYC roundtable - Video [Last Updated On: May 3rd, 2014] [Originally Added On: May 3rd, 2014]
- On est Connect S2 #07 1/2 : BitCoin et Musique sur Internet - Video [Last Updated On: May 3rd, 2014] [Originally Added On: May 3rd, 2014]
- MIT Undergrads To Receive $100 Worth Of Bitcoin This Fall - Video [Last Updated On: May 3rd, 2014] [Originally Added On: May 3rd, 2014]
- Why it only took ME less than 2 minutes to believe in Bitcoin - Video [Last Updated On: May 3rd, 2014] [Originally Added On: May 3rd, 2014]
- Bitcoin Basics and Regulation Thoughts from NH Liberty Forum - Bruce Fenton - Video [Last Updated On: May 3rd, 2014] [Originally Added On: May 3rd, 2014]
- PRIMER CAJERO DE BITCOIN EN BIT CENTER DE TIJUANA - Video [Last Updated On: May 3rd, 2014] [Originally Added On: May 3rd, 2014]
- Yelp adds Bitcoin acceptance to business listings - Video [Last Updated On: May 3rd, 2014] [Originally Added On: May 3rd, 2014]
- Bitcoin A Terrorist Threat? Counterterrorism Program Names Virtual Currencies As Area Of Interest [Last Updated On: May 4th, 2014] [Originally Added On: May 4th, 2014]
- How Does Bitcoin Works - Video [Last Updated On: May 4th, 2014] [Originally Added On: May 4th, 2014]
- 10 Things You Didn't Know About BitCoin - Video [Last Updated On: May 4th, 2014] [Originally Added On: May 4th, 2014]
- BITCOIN The Future of Money - Video [Last Updated On: May 4th, 2014] [Originally Added On: May 4th, 2014]
- Bitcoin Miner Review - Video [Last Updated On: May 4th, 2014] [Originally Added On: May 4th, 2014]
- The Bitcoin Group #28 (Live) - Yelp Lists Bitcoin - MIT Bitcoin $100 - Dark Wallet - Ohio Bans BTC - Video [Last Updated On: May 4th, 2014] [Originally Added On: May 4th, 2014]
- Bitcoin: Gary North is Mentally Deranged And Bitcoin Will Change Everything - Video [Last Updated On: May 4th, 2014] [Originally Added On: May 4th, 2014]
- Who is the Bitcoin Warlord? - Video [Last Updated On: May 4th, 2014] [Originally Added On: May 4th, 2014]