When you send Bitcoin and perform transactions, there is a fee charged to miners whose task is to verify transactions, create blocks in the block chain and maintain network security. The mines who manage to resolve the encryption for a block today receive 12.5 BTC in reward + all transaction fees that the block contains. With technical solutions in the bitcoin network (such as Segwit and Lightning Network) you can manage more transactions on the network and transaction variables become lower, allowing efficient and fast creation of new blocks.
Proof of Work means that new blocks of transactions are created by computer power that resolves encryption by adding "puzzles", when the first miner finds the solution, it is easy to reverse verify and confirm the block and achieve consensus among miners in the network.
Asic is specialized circuits that focus solely on solving encryption, today it is asic that applies to bitcoin mining.
There are other cryptovalutors where the algorithm is based on Proof of Stake, which means that nodes should hold shares in the cryptovalutan. Ethereum will move from Proof of Work to Proof of Stake. A node is chosen by chance and depending on how much currency the node holds that may create the next block in the chain. Through its "Stake" put at stake, the node pays for security.
What is Bitcoin?
Bitcoin is a peer to peer payment system created in 2009 under the pseudonym of Satoshi Nakamoto. Bitcoin transactions are recorded in a public ledger known has the “blockchain” and use its own appellation (Bitcoin) as unit of account.
Bitcoin has per main attribute to not be controlled by a single entity or central bank which has led the US Treasury to call it a “decentralized currency”.
How Bitcoins are created?
Bitcoins are created by using mining equipment. The computers are given a complex mathematical equation to solve. The reward for solving it are Bitcoins. The Bitcoin network auto adjust itself to regulate the value of the Bitcoin economy.
What are the advantage of bitcoin?
The pros of using Bitcoin are numerous and includes, anonymity, instant money transfer around the world and of course zero fees on transfer compared to traditional system like bank transfer.
How to store Bitcoin?
Bitcoin can be stored using wallet for devices such as smartphones, computers.
The truth About Bitcoin Mining
When people first hear that you can buy a ‘Special PC’ which magically solves complicated algorithms to ‘create’ these mythical bitcoins they usually do back flips. WHAAAAAT!? I can loads of BITCOINS IN A MONTH IF I HAVE XXXX PETAHASH omg GG gogogogogo!!
The more prudent investors carefully weigh up the cost of ‘creating’ a bitcoin as opposed to the direct acquisition of the coin itself. Unfortunately they are met with a barrage of spam and lies on the internet and really don’t know what to trust or who to believe. From working out the kWh it costs per month to trying to figure out how much space they would need as well as cooling, racks/mounting and staffing etc (Depending how large scale they want to go)
In the mind of most people creating the coin makes more sense since your hardware can continue to do so indefinitely, as opposed to just buying a bitcoin which is not only boring by comparison but a one time purchase. You also have the sense of satisfaction from actually contributing to the Eco system which helps to not only create the coin but secure the network and verify transactions.
Having said that, there is really only so much one can do relative to the speed at which the network hash rate continues to accelerate. If you are thinking about entering the mining space please remember this, while you calculate the gajillion BTC you will earn also factor in the electric costs (major factor) and really consider the network hash rate (see HERE for official chart)
Once you have taken all these considerations into account you should have noticed that you will have to re-invest between 25% – 50% of your revenue into buying more hardware if you want to earn as much BTC as you did last month (These figures fluctuate on the difficulty recalculation every 12 days)
One of the things which was like a kick to the nuts for us – was when we started mining the network was at a comfortable 25-30 Petahash, most miners were using GPU with some basic asics in the mix – mega industrial monopolized mining had not yet occurred and life seemed great. We got to help a system we genuinely believe in while assisting in the creation of what we predict will be the future of money (and of course being rewarded in BTC for doing so – Satoshi’s genius design using the worlds desire to be rewarded @ over lvl 9000+) unfortunately as the days turned to weeks… and the weeks turned to months… we realized a depressing trend –
In the beginning of our operation I sat down with my partners and asked what seemed to be a dumb yet pertinent question, If these guys are building these ASIC machines which literally create bitcoin… Why aren’t they just plugging them into the walls themselves and benefiting? Who told me to say that….. see that ice cream on the left? that is what the mining world felt when 4-5 companies set out to do just that. Now at our hash rate we felt a significant reduction in revenue which literally made us re-evaluate our entire operation. We had to relocate and reduce over heads just to keep up with these giants – I can’t even imagine how a kid with 400 Mega hashes or the guy who saved up for months to buy a 1.6 Thz CoinTerra rig must have felt when they literally watched their hardware become obsolete in a month. Please don’t miss understand what we are saying, everyone has free will and it is the right of any company to use the hardware they manufacture in any way. However… when we the consumer realize that the same CoinTerra (and a few others like them) sold us the OLD hardware they already used to help fund the research and development of their new hardware which they roll out in their 11 Megawatt facilities…. It left the taste of… well… (insert expletive here) in our mouth. Good luck trying to compete against the same people who are selling you the hardware at full retail.
Where the future of mining will go we really don’t know – maybe we will break an Exahash next year… Maybe some ‘MegaBigPowers’ will slow down when they see the cost of BTC dip and they cannot sustain their Rockefeller sized franchises, or maybe BTC will take its rightful place on the moon and Moore’s law will kick into effect causing some pretty epic drama in the Eco system.
Long story short guys – unless you are hashing alt coins which you see dishonest people pumping & dumping (we do not believe in the gain of wealth through the suffering of others,) or you found some magical coin which you want to help strengthen.. OR lastly you just enjoy helping the Eco system and are speculating that Bitcoin will be $10,000 by 2015. We would strongly advise you find a space which would lead to a better return for you.