Simply put, this is the process of utilizing computer hardware to solve complex mathematical problems around the clock, hopefully earning a reward for their work. This reward could be monetary or technical in nature. Mining naturally gives legitimacy to Satoshi Nakamoto’s vision, enabling a free and decentralized network to deal with all Bitcoins and other digital currencies. In short, this is how digital assets are stored.
How Does it Work?
When you complete a transaction, it gets recorded by the network as a block. The next step is to ensure that each block is correctly solved by miners, i.e., each transaction is counted and its solution validated before it gets into a block. Then only the largest majority of blocks ( Segwit2x) can be active at any given time. Transactions get confirmed into the protocol within a few minutes after being created. This makes the whole process pretty fast.
Some people have proposed ways to speed up this process but none have actually been developed yet. One way that has been presented is to increase the reward that miners receive for solving a block, thereby making it harder to do effectively. However, this is opposed by many because they do not want to give up the power of their own to other miners.
Another way to speed up the process is to make use of what is called ” bitcoins without”(B wit) which involves connections to what is known as ” Bitcoins without” or “digital wallets”. What is this exactly? Basically, these wallet types have a special address that is programmed into them to transfer funds when you want to. These wallet types function like any other ordinary computer wallet, except that instead of having a balance in your local currency, they transfer your funds to bitcoins in an easily transferable form of currency.
Advantages and Disadvantages
There are several advantages and disadvantages associated with using this type of service. First off, there is no physical location where all transactions happen. Instead, everything happens online on the peer-to-peer network. As such, if you wanted to spend money from your local currency, you would be limited to what is in your local area. But since the transactions are all done online, it is very easy to spend money from the United States to the United Kingdom without having to worry about any kind of conversion problems or exchange rates. Another advantage of these bitcoins without a central authority is that there is no third party involved in any way.
One thing that makes bitcoins so attractive is the use of what are called “mining rigs”. What is a mining rig? Basically, a specialized machine that can solve the hash problem which is inherent in the way that computers process transactions. What is a hash problem?
Hash Problem
A hash problem occurs when the speed of a particular computer’s CPU is able to break the mathematical constraints which are placed on how many transactions can occur in a certain period of time. To make this easier to understand, imagine if there were two people who each had a table and they both wanted to place ten cups of coffee on their table. Obviously, it would take the combined CPU times the hash function, which is a very long and complicated mathematical operation, to actually place the ten cups of coffee in the specified timeframe. Due to the hash function being a special application-specific integrated circuit (ASIC), no matter how much computing power the miner has, no matter how many computers the hash functions on, the hash will never be able to complete the task.
Final Words
What is also interesting about how miners have the ability to choose the right answers is that there is no way for the average person to do this. In order to “mine” the bitcoins, you need to have some specialized equipment. What is interesting about this is that it takes the average person, or just about anyone with a computer, to start generating their own little bit of digital gold! It is very similar to what gold prospectors do, where the average person can literally walk into a mine and start getting the right answer to their question by just knowing what questions to ask in the area where the gold is located. The same thing can happen with this new digital currency, called bitcoins. The difficulty is that the actual supply of bitcoins is hard to accurately predict, making it very risky for any investor who would try to guess the right answers to the hash algorithms and therefore create their own little piece of gold.