Simplify bitcoin mining

Bitcoin mining is the process of verifying bitcoin transactions and recording them in the public blockchain ledger. In blockchain, the transactions.
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That ledger, is known as the block chain. You perform a transaction, it gets updated to every block chain that exists in the network. Hence, block chain is a technology that is decentralized. Anything that happens in the block chain is a function of the network as a whole. Your wallet stores the secure keys that enables you to access your Bitcoin address in the network. Does that make sense? If not, try to think of it like this. Your wallet stores the key with which you can open your safe. The safe. So how is the Bitcoin sent or received?

Not inwards. By the end of this blog, you would know more about this revolution than 90 percent of the people out there who pretend to know.

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We have come a long way in economics and commerce. From the barter system in the long past to declaring a set of standardized asset as the foundation for commerce, mankind has enabled globalization and open commerce across the borders. It includes deposits, cheques, and assets that can easily liquidated.

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So basically, all our money, the fuel for our entire brief existence on this little blue planet, the stuff we worked our asses off for, has just shrunken from bloated paper notes to just electric signals sent across a protected network. They are just feeble electronic representations travelling to and fro inside a cyber-superhighway.

Chapter 8. Mining and Consensus

And who verifies these transactions? The trusted third parties TTP that we call the banks. Oh, too much power concentered in a few men. So how and where does this crypto-currency fit into? We will just go with a real world analogue.

Imagine that you want to give your friend Sam a Coin. You both meet one fine forenoon and you hand him over the coin. To buy some ice-cream or to pay for movie ticket. The coin has no use for you anymore. It has left you. Sad though! So far so good. Now, imagine that the coin is digital. Being digital, you can duplicate the coin. You can save some copies in your computer itself, give one to Sam, fool him or send some over to your girlfriend.

No one really knows whether they are dealing with the real asset or just a copy. This is an infection of the basic system itself.

The Basics of Cryptocurrency Mining, Explained in Plain English | The Motley Fool

The paper notes that really are worth shit has value only because we give them value. So what happens if people know that the digital currency in circulation may not be original and can be duplicated easily? If duplications happens in mass scale, it loses value. The economy collapses. Revolts happen. People starves and kill each other fighting for the limited resources available. Any currency system, that has inherent vulnerability in them which enables them to be spent many times over, sabotages the entire economics built upon them.

Civilizations collapses with economic collapse. I am using the classic Alice and Bob analogue that we are so familiar with. Or not. Alice and Bob are here to diffuse tension and make things easy for everyone from high-schoolers to undergrads. Now, you only know that Bitcoin is a digital currency. We will begin from there. Imagine that Alice wants to send Bob a Bitcoin. She needs to have a wallet, which is a special software, where, it seems, she collects the keys required to access and transact Bitcoins in the network.

To send Bitcoins aka, perform transaction , a person needs two things. A Bitcoin address and a private key. A Bitcoin address is a randomly generated alphanumeric number. The private key is another set of numbers, but unlike Bitcoin address, private key is kept private as the name aptly suggests. If you have heard the term private key before, you must also know that it is so important to keep it safe.

Just think of it like your password. It is so damn important. Think about your Bitcoin address like a safe deposit box with glass in the front.

Alice then signs the transaction with her private key Like signing cheques in the real world and then send out the transaction to the wider Bitcoin network. The transaction consists of 3 pieces of data. Now, the mathematical magic of the block chain happens.

Bitcoin Mining Explained

People are doing Bitcoin transactions all across the world. They are sending and receiving Bitcoins as financial payments. But somebody has to make sure that these transactions are valid. For validating, these people, called as the miners, have to solve a computational puzzle. The person who solve the puzzle gets to validate the transaction and add the transaction to the rear of the block chain. Once the transaction is added to the block chain, two things happen. You inquisitive geniuses, you want more. Alice has sent bob a Bitcoin. This transaction is reflected into the network, from where a miner collects the block.

A miner is a person in the Bitcoin network who is hunting for Bitcoins. Now he has to perform a processing and find a mathematical solution that will ultimately validate the transaction. Until he validates it, the transaction remains pending, and people all across the world are mining, because they want to get super rich and buy private islands. What is mathematical solution, you may ask?

Bitcoin Explained In Simple Terms

It is a cryptographic hash function the miner needs to run in his computer. A hash is a one-way function that maps a data of arbitrary size to a stream of bits of fixed size. These hashes have interesting properties. Given a set of data, it is very easy to generate its hash. You can create a text file in your desktop and then generate its hash in seconds.

But in case you change the content of the text file even by a comma or a full stop, the resulting hash changes significantly. You now know where you have seen it mostly- in the torrent sites from where you download the movies. There is a hash being printed there, that lets you verify that the torrent you have just downloaded is the one which was original uploaded, and not an intruder virus file.

For example, the following is a hash of a text file with my name typed inside it. If I put an extra full stop after my name inside the file, and then recalculate the hash, I obtain.


  1. Bitcoin Mining Explained - The Edition.
  2. Navigation menu.
  3. Introduction?
  4. hurst exponent bitcoin;
  5. Bitcoin Mining Definition.

Did you notice the strange shifts in number? Those two numbers have no correlation at all. There is no way in hell that you can reconstruct my file from that hash.

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I will explain why. But if the hash is significantly long and strong enough, a computer will dissipate to nothingness along with the ultimate heat death of the universe before it can reverse the hash. Hash algorithms like SHA are protecting your passwords as well as your browser from a variety of attacks. It is omnipresent. So you may ask, if it is possible, how much time it would take for a set of supercomputers to reverse a hash? We will come to the security details later. So the miner has to run a cryptographic hash function on the data that makes up the block.

Mining algorithms that the miners use employs other data too, to create the hash. One of these data is the hash of the previous block in the block chain. They might use some more random data too, sprinkled in there, for like a little seasoning. Just think it like this. You take the contents of the block to be validated , some random data of your own, the hash of the previous block, and then mixes all this and generate a hash.

So, what is Bitcoin mining best hardware?