How Bitcoins Are Made for Beginners

How Bitcoins Are Made for Beginners


Let us say you had one legit $20 and one really good photocopy of the same $20. If someone were to try to spend both the real bill and the imitation one, someone who took the problem of looking at both of those invoices' consecutive numbers would see that they had been exactly the exact same number, and consequently one of them needed to be false.

That isn't a perfect analogy--we will explain in more detail below. .

Once a miner has confirmed 1 MB (megabyte) worth of Bitcoin transactions, they are entitled to win the 12.5 BTC. The 1 MB limit was set by Satoshi Nakamoto, and is a matter of controversy, as some miners believe the block size should be increased to accommodate more information.

Note that I stated that verifying 1 MB worth of transactions makes a miner qualified to earn Bitcoin--not everyone who supports transactions will receive paid out.

1MB of transactions can theoretically be as small as 1 transaction (though this is not at all common) or a few thousand. It depends on how much information the transactions take up.

In order to earn Bitcoin, you need to meet two conditions. One is a matter of work, one is a matter of luck.

2) You must be the first miner to arrive at the perfect answer to some numeric issue. This process is also known as an evidence of work.

The fantastic news: No advanced math or computation is involved. You might have heard that miners are solving difficult mathematical problems--that's not true at all. What they are doing is trying to be the first miner to come up with a 64-digit hexadecimal number (a"hash")  that is less than or equivalent to the target hash.

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The bad news: Because it is guesswork, you need a lot of computing power in order to get there first. To mine , you need to have a high"hash rate," that is quantified in terms of megahashes per second (MH/s), gigahashes per second (GH/s), and terahashes per second (TH/s).

If you want to estimate how much Bitcoin you can mine along with your mining rig's hash pace, the website Cryptocompare provides a very helpful calculator.

Either way a GPU (graphics processing unit) miner or an application-specific integrated circuit (ASIC) miner. These can run from $500 to the tens of thousands.  Some miners--especially Ethereum miners--buy individual graphics cards (GPUs) as a cheap method to cobble together mining operations.  The photo below is a makeshift, high-tech mining machine.  The cards are those rectangular blocks with whirring circles.  Note the sandwich twist-ties holding the pictures cards to the metal pole.

ExampleI tell three friends that I'm thinking of a number between 1 and 100, and I write that number on a sheet of paper and seal it in an envelope. My friends don't have to guess the exact number, they just have to be the very first person to figure any number that's less than or equal to this number I am thinking of.

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Let's say I'm thinking of the number 19. If Friend A guesses 21they shed because 21>19. If Friend B supposes 16 and Friend C guesses 12, then they've both technically came at viable answers, because 16<19 and 12<19. There's no"extra credit" for Friend B, even though B's answer was nearer to the target answer of 19. .

In Bitcoin conditions, simultaneous answers occur frequently, but in the end of the day there can only be one winning answer. When multiple simultaneous answers are presented that are equivalent to or less than the target number, the Bitcoin network will determine by a simple majority--51%--which miner to honour. Typically, it is the miner that has done the work, i.e.

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The losing block then becomes an"orphan block" .

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Now imagine I pose the"guess what number I am thinking of" question, however I'm not asking just three friends, and I'm not thinking of a number between 1 and 100. Instead, I'm asking millions of would-be miners and I am thinking about a 64-digit hexadecimal number. Now you see that it is his response going to be extremely hard to guess the ideal answer.

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The number preceding has 64 digits. Easy enough to understand so far. As you probably noticed, that number consists not just of numbers, but also letters of this alphabet. Why is that

In order to understand what these letters are doing in the middle of numbers, let's unpack the term"hexadecimal."

As you knowwe use the"decimal" system, which next page means it is base 10. This in turn means that each and every digit has 10 possibilities, 0-9.

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