Bitcoin maybe the next big thing in economics but it is pretty difficult for most people to understand how it operates. There is a lot of numbers involved making it very technical and complex but understanding it is critical to its success.
We all know it is a digital currency but the biggest difference between traditional form and Bitcoin is that it is decentralized. There is no central government regulating it. How do we regulate it? The simplest answer to this is mining.
What is Bitcoin mining?
The easiest way people try to understand Bitcoin Everything you need to know about Bitcoin miningmining is by drawing an analogy with mining of gold. So there is only a limited amount that you can extract. However, it works very differently. One of the major differences is that Bitcoin is not a product of mining. Bitcoin is granted as a reward for validating previous transactions.
Mining requires a special program on a computer. Miners use these program and other computer resources to keep up with other miners in solving technical mathematical problems. So miners are the backbone of Bitcoin network, without them it would collapse.
But to understand mining at it roots, we need to know what Blockchain is. All Bitcoin transactions are recorded in Blockchain which is essentially a public ledger. It is freely shared, under no central control which is continually updated. This has enable a monetary network worth billions of dollars.
With the rising power of mining hardware, Bitcoin has not accelerated due to some reasons. Issuance of Bitcoins is regulated by an algorithm named Difficulty which balances the difficulty of the Proof of Work issue in accordance with how rapidly blocks are resolved within a certain interval.
Who are Bitcoin miners?
In the beginning, Bitcoin miners were only those people enthusiastic about cryptography. People interested in these projects used their computer to validate the Blockchain and get access to Bitcoins. As the value is soaring, many other people are perceiving it as a successful business. They are investing more into hardware to get the most out of it.
Is it legal?
The simplest answer to this question is yes. However there are some exceptions depending on the circumstance and place you live in. There are very few countries that have explicitly forbidden Bitcoin mining. In many countries it is either permitted or unregulated.
You can research on the Internet about its legality. Some countries where it is banned is China and Bangladesh. Double check the legal status with your country before starting any process.
How to mine Bitcoin
Here is a pretty summarized version of how to mine Bitcoin. It would give you a brief idea about how it must be done. Follow the process:
- Get the relevant Bitcoin hardware. Get an ASIC miner and all other pre-requisites.
- Select a mining pool. Do not go for solo mining since mining pools are way more beneficial.
- Get Bitcoin mining software.
- Make sure it is legal.
- Make sure it is profitable to you.