Cryptocurrencies are digital assets designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currencies. In general terms, cryptocurrencies are the digital form of money which can be collected, mined using computers. These computers try to figure out the long bits of codes called hashes from a bigger code called a block. Wherein one hash is equivalent to one coin.
Bitcoin is a type of cryptocurrency and a digital payment system. It was invented by an unknown programmer, or a group of programmers, under the name Satoshi Nakamoto, and was released as open-source software in the year 2009.
It is considered the first decentralized cryptocurrency since the system works without a central repository or single administrator. It follows a peer-to-peer system, inter alia, the transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain.
Besides being created as a reward for mining, bitcoin can be exchanged for other currencies, products, and services in legal or black markets.
As of February 2015, over 100,000 merchants and vendors had accepted bitcoin as payment. According to Global CryptoCurrency Benchmarking study by Dr Garrick Hileman & Michel Rauchs (2017) produced by Centre For Alternative Finance, University Of Cambridge, there are 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.
What are the benefits of cryptocurrencies/ bitcoins
Primarily it is believed that the cryptocurrencies like bitcoin are impossible to duplicate. There is also a limited amount of token available, which effectively make bitcoins and other cryptocurrencies equivalent to or costlier than gold. According to the author Mike Thornton (author of History of Money) “it is estimated that the total number of bitcoins, which is 21 million, will have been completely mined out by the year 2140.“
Another benefit of cryptocurrency is that it is decentralized, wherein no one group has the authority to make more of it. Hence, it won’t be taken down and made worthless. Therefore, it is usable anywhere in the world.
How do you mine Bitcoin?
Bitcoin mining is legal and is accomplished by running SHA256 double round hash verification processes in order to validate bitcoin transactions and provide the requisite security for the public ledger of the bitcoin network. The speed at which you mine bitcoins is measured in hashes per second.
The bitcoin network compensates bitcoin miners for their effort by releasing bitcoin to those who contribute the needed computational power. This comes in the form of both newly issued bitcoins and from the transaction fees included in the transactions validated when mining bitcoins. The more computing power you contribute then the greater your share of the reward.
In order to mine bitcoins, you need to arrange the specific type of hardware which can support bitcoin mining software. once you have received that compatible hardware you need to download the bitcoin minding software (algorithm), connect to bitcoin mining network and let the computer break the mathematical codes.
Depending upon the complexity of the mathematical problem, you can receive the corresponding cumber of bitcoins as a reward.
However, the difficulty of the bitcoin algorithm changes with time depending upon the speed at which they are being mined worldwide.
The cryptocurrency mining is not for technology impaired people. Since Bitcoin has been in existence since 2009, there are many miners and the mathematic algorithms are more difficult to solve. If you try to mine bitcoins now, the expenses incurred by you will offset the bitcoin mined by you.
To get around the problem of cost-effectiveness, the minders gather around to create a mining pool. These are the collection of cryptocurrency miners who pool their resources so they can mine bitcoins more efficiently. In furtherance of which you stand the chance of mining more coins, albeit the value of the same is distributed equally among the investors.