The creation of digital currency is probably the most interesting technological innovation.The first product of digital currency is the Bitcoin trading platform which was introduced in 2009 by a pseudonymous person Satoshi Nakamoto.
Since then, more than 18,000 cryptocurrencies have evolved.In just a decade, bitcoin has become the most famous cryptocurrency in the world among all of them.Almost all cryptocurrencies are created by the mining process.Today, in this article, we will try to understand in detail how the most famous cryptocurrency, bitcoin, is created.
Mining - the process of creating a new bitcoin:
Bitcoin mining ensures that new bitcoins come into circulation.It is a complex process that involves mathematical calculations where mines, the manufacturers solve cryptographic puzzles.
Mining needs powerful computers and high-energy resources.The computational process that a miner’s computer performs needs to provide a reference of the work to the next miner,which is called Proof of Work (PoW).The PoW is an authentication of the miner's work that he or she has successfully solved the mathematical calculation, and for their work, they get new bitcoins as a reward.
What happens in bitcoin mining?
In bitcoin mining, transactional data of bitcoin that are stored in the blocks are getting verified.Bitcoin’s blockchain network is a distributed ledger system where transactional data are stored in every block.But, the actual size of each block is 1 megabyte which a miner verifies at a time.To verify a block, the miner needs to download it into the computer system so that he or she gets all the transactional information.Then a cryptographic hash puzzle is solved.By successfully solving a puzzle, the miner gets new bitcoins as an incentive.
The first block (genesis block, block no – 0) was mined by Satoshi Nakamoto.That time the reward was 50 bitcoins.But, that number gets halved after every 210,000 blocks,whichhappens approximately after every four years.So, as per the calculation, the number of rewarded bitcoin is 6.5 now.
Mathematical calculation in mining:
Now, let’s get into the detailed process of mining.Mining is specifically done by solving a part of a block called the block header where the data are stored.The whole process consists of six layers.
Version: This is a software version that the miner downloads at first.
Timestamp: Timestamp is the specific time when the block was created.
Previous block hash: Every transactional data of the previous block contains a hash number with it.It is called the previous block hash.
Markle root: All the transactional data of the previous block with the block hash are again hashed together and form a tree-like structure.This whole thing is called Markle root.
Difficulty target: This is a set target that the miners have to solve.The main mathematical calculation is done here.The target is a 64-digit hexadecimal number.The number contains some zeros in the beginning.
Now, the miners have to put in the computational effort to meet the difficulty target.Two criteria are there to solve it.
- The miners have to come up with a number that is the same or closest smaller to the difficulty target.
- As many miners perform at the same time, the first miner who comes up with the number would be the winner.
Nonce: The process of getting an accurate number is not easy. So, every time a miner fails to get the number, he or she gets a new chance or a new difficulty target which is performed in the last layer nonce.
Wrapping it up !!!
Many people choose mining as profitable work.But, it is an expensive arrangement too.Because bitcoin mining needs powerful computers and electricity, it takes almost 10 minutes for each block to verify.Rather, you can choose bitcoin trading as an extra income.
Bitcoin trading has become a trendy profit-generating way nowadays.So many user-friendly trading exchange platforms and applications are there, like the, with this link you will be redirected to the browser where you can register and start trading. At the same time this auto-trading app gives you a complete understanding of how the crypto market operates.But, just like mining needs knowledge of computer programs and the mining process, bitcoin trading also needs adequate knowledge about the bitcoin market and its price movement.
