What is Bitcoin and how it can be “mined”? Bitcoins for beginners
Recently, interest in the cryptocurrency has been growing – the rapid growth of popularity and the rate of virtual money, especially since the beginning of 2017, has made them a trend topic. If a few months ago we talked about the possible cost of Bitcoin at $ 5,000 per unit, today the rate of bitcoins worth today has already the $ 10,000 mark and continues to grow.
What is bitcoin?
Bitcoin is, in fact, the first and most famous of many other virtual currencies. It appeared in 2009, the creator is Satoshi Nakamoto. Its main advantage is impossibility of a fake, because one coin is a set of data carefully protected from hacking and copying with the help of various cryptographic (encryption) methods of protection. Therefore, bitcoins are called cryptocurrency.
In addition to bitcoins, there are many other digital currencies that differ in the way of cryptography, that is, their own unique data encryption. The most popular of them, according to bitcoins yahoo finance, are Ethereum, cost about 300, Dash – about 200, Bitcoin Cash – about 300, Litecoin – about 45 US dollars.
The amount of crypto-currency is limited – it is possible to issue or extract 21 million bitcoins, or at least 16.5 million already in the world. Due to these peculiarities, the bitcoins latest price is growing, especially since the beginning of 2017.
What is mining?
Mining is a mechanism for creating bitcoins, which really can be compared to gold mining, which is supported by the current currency. If the creation of the first bitcoins was sufficient for a conventional computer, thereafter the need to increase the capacity of the system at the expense of expensive computer equipment was constantly growing. That is why the process was called “mining”, and programmer-earners began to be called “Miner”.
Just as miners receive wages for gold mining, programmers receive a reward for bitcoins extraction – in the form of the same bitcoins. Approximately from 2013, mining without specialized processors became unprofitable: the cost of consumed electricity exceeded the average revenue.
Bitcoins can be mined and even made with money, but it will not always be profitable. The mining process is called mining. Thanks to it, there are transactions on the network, and thanks to the huge capacity it is impossible to crack.
Doing alone mining is a senseless undertaking, since only one computer receives rewards. And since the competition is extremely high, the chances that it will be your PC are very low. It’s like a chance to win the lottery.
Bitcoins sign up: the miners unite into huge groups through special sites – pools and engaged in joint mining. Together to get a block is much more likely. Rewards are divided among all participants in the proportions of its investment.
Taking into account the great competitiveness and increase in the complexity of extraction, it becomes more problematic to earn money. The benefit of Bitcoin’s growth is compensated in full.
The more coins are issued, the more difficult it is to create new ones. But still, due to the growth of the Bitcoin price, there is still a chance of earning money. When they only began to appear, it was thousands of times easier to extract them due to less complexity. The fee for creating a new chain of blocks was 25 BTC, from the summer of 2016 it is 12.5 BTC. In 2020 there will be 6.25 BTC.
What are the features of Bitcoin?
The main feature of Bitcoins is the absence of a central administrator of the network, which means that this currency is completely decentralized. The bitcoins cash out transaction cannot be returned in any way – therefore the error in the sending addresses is invalid.
All bitcoins shares and payments here are absolutely anonymous. There is a common database of all transactions, made using Blockchain technology), where you can see in open access from which purse and where the funds went. However, the available information ends here. Nobody knows who owns the wallet and where it is located territorially. You can read it in bitcoins documentary.
Due to the fact that each transaction on the Blocker network must be confirmed by other network members, it is impossible to forge a translation or any translation in Bitcoins. In order for money to really go from one address to another, you need a network confirmation. You can not forge a translation, unless you have a computer that is so powerful that has a capacity exceeding 50% of the network, and that’s millions of computers around the world.
What is blockchain?
The emergence and rapid growth of popularity bitcoins contributed to the spread of technology, which, in fact, is built and operates a system of cryptocurrency. A way of storing data or a digital register of any operations organized in blocks by chain principle, called Blockchain. If it’s easier, it’s a way for a separate group of people to independently manage a kind of virtual “accounting book” and build relationships on mutual trust (for example, open information about the state of the account), rather than trust management of their money to others.
And now imagine that one sheet of such a book is a block, and the book itself is a chain of sheet-blocks: something like “blockchain” technology looks like. New blocks are always added exclusively to the end of the chain. So, each next block depends on the previous one.
It is thanks to the “blockchain” technology that the basic principles of bitlock are provided: transparency, anonymity, decentralization, speed, security and guarantee.
The only “Achilles heel” of blocking technology is the so-called “51% attack”: when most users agree to change data and build a longer parallel chain, new records of which will automatically be recognized as correct. In this case, the protocol intentionally ceases to work, since the system is based on the assumption that the majority of participants extract bitcoins in fair competition.
At last for bitcoins review
Many already now call Bitcoin the currency of the future, but so far it is too early to talk about bitcoins use everywhere. This can happen only if all countries legalize it (see laws on Bitcoins). But so far all countries have this issue under consideration and there is no exact clarity.
Another problem for Bitcoin are other promising cryptocurrencies – Efirium, Dash, Ripple, Monero. There is a possibility that one of them will lead the championship in the struggle for mass use.