9 Easy Facts About How Bitcoins Are Made Described

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Let us say you had one legit $20 and one quite good photocopy of that same $20. If someone were to attempt to spend both the real bill and the imitation one, someone who took the trouble of looking at either of the bills' serial numbers would see that they were the same number, and thus one of them had 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 can be a matter of controversy, as some miners believe the block size should be increased to accommodate more data.

Note that I said that verifying 1 MB value of transactions makes a miner eligible to earn Bitcoin--not everyone who verifies transactions will get paid out.

1MB of transactions can theoretically be as little as 1 transaction (although this is not in any way common) or several thousand. It depends on how much information the transactions consume.

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

2) You must be the first miner to arrive at the right answer to some numeric problem. This practice is also known as a proof of work.

The fantastic news: No advanced math or computation is involved. You may have heard that miners are solving challenging mathematical problems--that is not true at all. What they are actually doing is trying to be the first miner to think of a 64-digit hexadecimal number (a"hash")  which is less than or equal to the target hash.

 

 

About How Bitcoins Are Made


The bad news: Because it's guesswork, you need a good deal of computing power in order to get there . To mine successfully, you need to get a higher"hash speed," that is measured in terms of megahashes per second (MH/s), gigahashes per second (GH/s), and terahashes per second (TH/s).

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

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

ExampleI tell three friends that I'm thinking about a number between 1 and 100, and I write that number on a piece of paper and seal it in an envelope. My friends don't need 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 us say I am thinking of the number 19. If Friend A guesses 21, they lose because 21>19. If Friend B supposes 16 and Friend C guesses 12, then they've both technically came at workable answers, because 16<19 and 12<19. There's no"extra credit" for Friend B, even though B's answer was closer to the target answer of 19. .

In Bitcoin terms, simultaneous answers happen frequently, but in the end of the day there can only be one winning answer. When multiple simultaneous answers are presented that are equal to or less than the target number, the content Bitcoin network will decide by a simple majority--51%--that miner to honour. Normally, it is the miner that has done the most 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 am not asking just three friends, and I am not thinking of a number between 1 and 100. Rather, I'm asking millions of would-be miners and I am thinking about a 64-digit hexadecimal number. Now you see that it's going to be quite hard to guess the ideal answer.

 

 

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The number above has 64 digits. Easy enough to understand up to now. As you likely noticed, that number consists not only of numbers, but also letters of this alphabet. Why is that

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

As you knowwe use the"decimal" system, which means it's base 10. This in turn means that each and every digit has 10 chances, 0-9.

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