There is no doubt that Bitcoin mining has become one of the hottest topics anywhere in the world. This is pretty much inevitable, considering that the price of the coin has increased at least fifteen-fold in the current calendar year, picking at nearly 2,000 percent just days ago. Can the incredible ascent of Bitcoin really continue, and how does Bitcoin mining really work?
No central control
The defining characteristic of cryptocurrency is the fact that it is not created by a central entity. Traditional money which we spend on a daily basis is printed, or at least created, by central banks. It is this centralization and control over money by a powerful organisation to which Bitcoin is intended to be the antidote.
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Bitcoin mining is far more democratic, in that any individual in the world can potentially mine a Bitcoin. However, there are two important aspects of this process that must be taken into consideration. Firstly, the number of Bitcoins in circulation is limited to a finite quantity, specifically 21 million. Secondly, actually engaging in Bitcoin mining is an extremely technical undertaking that 99 percent of people on the planet would have absolutely no chance of achieving whatsoever without significant training.
Creating a Bitcoin block requires significant coding skills, with locating a block having been converted to a type of networked lottery. Bitcoin mining attempts to identify a new block effectively represent a random guesss for a lucky number, although this is achieved with computational power rather than guesswork.
Most big Bitcoin mining attempts are unsuccessful, which results in a waste of energy. But every 10 minutes a mining attempt is successful, and this adds a new block to the existing Bitcoin blog chain. This creates a proof of work, which is essential to the concept of becoming mining. Above all else, this solidifies the history and the security of becoming, meaning that attackers would have to Carry out all work that has ever been done in order to steal a Bitcoin. This is already practically impossible.
As it stands today, Bitcoin mining has become extremely challenging, as the amount of energy required to create a block is a massive financial disincentive. Only expert coders with massive data centers can really expect to be successful in the contemporary Bitcoin mining climate, although the astronomical increase in the value of the project currently means that simply buying and selling the dips has proved to be hugely profitable.
If this all sounds complicated then the technical background to Bitcoin mining is even more so. During the mining process, any hard work involved in Bitcoin mining must involve running a cryptographic hashing function, on what is referred to as a blockhead. Each new hash involves the mining software using a different number as the random element of the block header. Ultimately, this yields a hash, which produces a long hexadecimal reference existing of digits and letters…which is absolutely incomprehensible to human beings!
This means that there are quadrillions of options for every hash, making cracking the code for the digital currency absolutely impossible. It also means that the unwieldy number is often expressed with a simpler series, as it is otherwise very difficult for humans to deal with. This simplified structure is referred to as the mining difficulty, and this figure expresses how much more difficult it will be to generate the current block as compared to the first ever Bitcoin.
Already, mining a single bit Bitcoin is tens of thousands of times more difficult than it was initially, which means that mining hardware and algorithms involved in Bitcoin mining have to be hugely powerful and massively optimized.
In order to ensure that blocks can be created every 10 minutes, the Bitcoin network automatically adjusts the shared formula involved every 2,000 blocks…well, 2016 to be precise! It is intended that creating 2016 blocks at the current global network processing power will take approximately two weeks. So as the network power rises, so the difficulty level rises to meet this evolving situation.
Bitcoin Mining Hardware
Considering this explanation, you may have already guessed that the hardware involved in Bitcoin mining is pretty advanced. Initially, it was only possible to mine Bitcoin with a CPU, utilizing the original Satoshi client. Of course, things have moved on considerably since then, and there are many more platforms available to keen Bitcoin miners today.
Also, CPU mining is virtually futile considering the computational power required in the contemporary climate. Indeed, mining for Bitcoin using a laptop could involve decades of effort without ever earning a single coin! Truly a Sisyphean task.
So there has been a transition to graphical processing units for Bitcoin mining in recent years, with the massively parallel nature of GPUs enabling a huge increase in computing power. It is also notable that this approach involves significantly less power usage per unit of work, meaning that GPUs are definitely must feasible for Bitcoin mining.
The AMD line of GPU architecture is generally considered to be the hardware of choice, as it has outperformed Nvidia architecture.
However, Bitcoin mining has now also progressed up the technology food chain, leading to dedicated hardware being produced with the intention of mining Bitcoin. This means that the Field Programmable Gate Array is now widely utilized, with the specially manufactured hardware having a big impact on the huge Bitcoin marketplace. With the successful launch of the Butterfly Labs FPGA ‘Single’, the bitcoin mining hardware landscape gave way to specially manufactured hardware dedicated to mining bitcoins.
Application Specific Integrated Circuitry is also utilized in modern Bitcoin mining; a type of hardware that is designed to carry out a specific task, rather than being all-purpose. ASIC is now considered the best solution for Bitcoin mining, and probably one that will probably not be superseded by a new innovation. There is considerable discussion of the best setup for Bitcoin mining on forums, and keeping up with this is essential to successful blockchain activity.
Bitcoin mining also takes place in that other disruptive technology the cloud, with clouds Bitcoin mining becoming ever more popular. Essentially, investors in this sphere purchase Bitcoin cloud mining contracts, which mean that they do not have to cope with the problems associated with mining hardware, software, electricity, bandwidth and other offline issues.
Many people are trying to get rich off Bitcoin nowadays, but this involves a significant investment of energy and effort, while there is also massive technical understanding required. While purchasing the coins is not difficult, and storing them is far from incomprehensible, even this requires more understanding than traditional money.
This means that Bitcoin mining will remain the preserve of a few for the foreseeable future, even as the price of Bitcoin continues to make headlines all over the world.