The Basic Principles Of Bitcoin Mining Efficiency

If you are mining Bitcoin, you do not need to calculate the entire value of the 64-digit number (the hash). I repeat: You do not need to calculate the entire value of a hash.

Bear in Mind that ELI5 analogy, in which I composed the number 19 on a piece of newspaper and put it in a sealed envelope

In Bitcoin mining conditions, that metaphorical undisclosed number in the envelope is called the target hash.

What miners are doing with these huge computers and dozens of cooling fans is guessing at the hash. Miners create these guesses by randomly generating as many"nonces" as you can, as quickly as possible. A nonce is short for"number only used once," and also the nonce is the key to generating these 64-bit hexadecimal numbers I keep talking about.

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The first miner whose nonce generates a hash which is less than or equal to the target hash is given credit for completing that block, and is awarded the spoils of 12.5 BTC. .

In theory you could Attain the same goal by rolling a 16-sided die 64 days to Reach random numbers, but why on earth would you want to do this

The screenshot below, taken by the site Blockchain.info, might help you put all this information together in a glance. You are looking at a summary of everything that happened when block #490163 was mined. The nonce that generated the "winning" hash was 731511405. The goal hash is shown on top.

As you see here, their contribution to the Bitcoin community is they confirmed 1768 transactions for this cube. If you really want to see all 1768 of these transactions for this block, then go to this webpage and scroll down to the heading"Transactions." .

There's no minimum goal, but there is a maximum goal determined by the Bitcoin Protocol. No goal can be higher than this number:

Here are some examples of randomized hashes and also the criteria for whether they will lead to success for the miner:

You'd need to get a speedy mining rig or, more realistically, join a mining pool--a group of miners who combine their computing ability and split the mined bitcoin. Mining pools are somewhat similar to those Powerball clubs whose members buy lottery tickets en masse and agree to share any winnings. A disproportionately high number of cubes are mined by pools rather than by individual miners. .

In other words, it is literally only a numbers game.  You cannot guess the pattern or make a prediction based on previous target hashes. The difficulty level of the most recent block at the time of writing is 2,874,674,234,416, i.e. the chance of any given nonce producing a hash below the goal is just 1 in 2,874,674,234,416--significantly less than 1 in 2 trillion. .

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The aforementioned website Cryptocompare delivers a helpful calculator which permits you to plug in numbers like your hash rate, electricity costs etc. to gauge the costs and benefits.

Mining rewards are paid into the miner who finds a solution to the puzzle , and the probability that a participant will be the one to find the solution is equivalent to the portion of the total mining energy on the network.  Participants which have a small percentage of the mining capability stand a tiny chance of discovering the next block on their own.  For instance, a mining card my company that one could purchase for a few thousand bucks would represent less than 0.001percent of their network's mining power.  With such a small chance at finding the next block, it might be a long time before that miner finds out a block, and the difficulty going up makes things even worse.  The miner may never recover their investment.  The answer to this predicament is mining pools.  Mining pools are operated by third parties and coordinate groups of miners.  By working together in a pool and sharing the payouts amongst participants, miners can get a steady stream of bitcoin starting the day that they trigger their miner.  Statistics on some of the mining pools can be seen on Blockchain.info. .

Sure. As discussed, the simplest way to acquire Bitcoin is to purchase it on an exchange such as Coinbase.com. Alternately, you can always leverage the"pickaxe strategy". This is based on the old saw that during the 1848 California gold rush, the wise investment was not to pan for goldbut instead to create the pickaxes used for mining.

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In a crypto context, the pickaxe equivalent would be a company that manufactures equpiment utilized for Bitcoin mining. You can start looking into companies that make ASICs miners or GPU miners. .