Every thing you need to know about bitcoin and cryptocurrencies

  • July 20, 2021

These days we hear a lot about mining bitcoin or other cryptocurrencies. But how do they mine? There are devices that are known as miner and are used to mine cryptocurrencies. But how do they work?

We are going to explain the process of mining using miners. If you want to know what is mining in the first place, you need to read the article “what is mining?”.

What is a mining device (miner)?

As you know most of cryptocurrencies like bitcoin or dodge coin, can be mined. It means that you can do some tasks related to the blockchain network and receive an amount of that currency as your reward.

In mining, the blockchain network, uses miners’ processors to do tasks like confirming transactions and adding blocks to the chain. Each device intending to mine should solve some complex mathematical equation and for that, it needs a powerful processor which can be found on miners.

In fact, the miners, using the powerful processor they have, download and run bitcoin software and also the entire history of the blockchain network to connect to the network. Once it is connected, it becomes a powerful node. The bitcoin miner adds a block to the blockchain network by solving complex mathematical equations. Therefore, the mining device will put numbers together using its processor’s power and hash function. It repeats doing it until it reaches the appropriate result. Of course using hash function method, the result can be achieved faster. Also the created hash should start with some zeros and this makes the guessing process faster and more accurate.

 

What is hash function?

Hash function is a function which receives an unlimited entry and creates an outcome with fixed length after doing some specific tasks. The entry of hash function can be anything from numbers to files and the outcome is called hash.

Hash function is mostly used for cryptography and proving that a data is original and has not been amended. Below, you can see an example of hash function with Md5 entry:

md5(“hello world”)=5eb63bbbe01eeed093cb22bb8f5acdc3

the first miner that can reach the number, is the winner and announces its guess to other nodes as well. Then the other nodes will stop working on this block and shift to another block, the reward of this block is given to the winner miner.

At first, mining bitcoin could be done by the personal computers and laptops’ processors but eventually the network difficulty grew and mining with PCs or laptops was not possible or better said, profitable. That is the time of miner emerging. Miners that were designed to mine bitcoin! After all, Bitcoin was and still is the most expensive cryptocurrency.

These powerful devices which pushed PCs out of the way were known as miner or ASIC. Miner device have many kinds and differ according to processing power and electricity usage. However, with the network difficulty increasing, ASIC devices are also developing and more powerful devices are introduced to the market.

 

What is ASIC?

ASIC is the acronym for Application Specific Integrated Circuit. These integrated circuits are designed for specific actions and are better than normal chips comparing their application, speed and power usage. Such chips are not flexible and can not be developed since they are designed for a specific target and can not be changed. Furthermore, producing them need a lot of time and money.

ASICs provide blockchain network’s security but they do it using a lot of electricity. In this process, the miner should guess a 16 digits number which is based on hexadecimal. This means that the number should be equal to or less than the hash.

How does ASIC miner work?

Generally the process of mining a cryptocurrency is guessing a number using the hash function and very complex calculations. ASIC tries many functions and numbers using its calculation power to reach the correct number and win the competition between miners to add a new block to the blockchain network and consequently receive the prize. This method is used in blockchains based on proof of work like bitcoin. The encrypted algorithm which is used to produce hash is called SHA256 and the devices that are designed to mine bitcoin should all support this encrypted algorithm. Of course this does not mean that such devices are limited to bitcoin. They can mine all cryptocurrencies which uses this algorithm.

The speed of a miner is also measured by a parameter called has rate. The higher the hash rate of a device, the faster it can guess the correct number.

what do you need to mine?

If you are ok with mining difficulties and the costs of mining bitcoin, there are three main steps that you need to take in order to enter the miners’ world.

  1. purchasing a miner
  2. using a secure and well known wallet
  3. joining a mining pool to start working

You need to purchase a miner because it has been a long time since the personal computers or laptops were ok for mining. Nowadays there is no profit in mining with your laptop, and you may also lose your laptop on it as well.

As it was said earlier, the gate to crypto world is digital wallet. Wallets connect you to the world of cryptos since with them you can join the blockchain network, store and maintain your assets and transfer or receive some cryptos. If you need more details about crypto wallets, please read the article here.

And yes, you need to join a mining pool. Now what’s a mining pool? It is a joint of many mining devices in order to enhance the power of mining so that you can win more prizes. Since the prize of mining for bitcoin is halved every four years, mining with just a miner is profitable as well. You need to gather all the power you can to win something in the battle of miners.

And if you think is it a good idea to mine, you should know that aside bitcoin, other cryptocurrencies are not that profitable to mine. Yet mining bitcoin is getting harder every day. So you need to know about all your costs before you enter the business. Joining a mining pool is for sure, but still there are different rules and regulations around the topic of mining in each country. You need to adjust with yours.

Having a mining pool puts more cost on your hand but as there are still many mining pools, it seems that it can be profitable. It only depends on where you are locating your pool.

Anyhow, in this article you learned about miners and ASICs as the most known types of miners. We will also introduce the best miners to work with so that you can choose with better understanding. There is another thing that you should know. Cryptocurrencies and generally blockchain are very profitable areas where you can earn a lot. This technology has many subbranches and mining is only one of them. So if at the end of the road you decided that mining is not good for your, don’t get disappointed because there are several other ways to enter the blockchain world and earn from it.

Please leave your comments below so that we can discuss the issue further.

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