What is a Bitcoin and How do Bitcoin Miners make Money?

The Bitcoin is a peer-to-peer digital currency which is freely distributed without any intervention of a central and regulating authority. A developer known as Satoshi Nakamoto in 2008 introduced the concept of using Bitcoin as a trading means in a written paper.

As Bitcoin is observed to be completely decentralized and uses cryptography as a means to effectively monitor and control all transactions thus preventing double-spending which has been one of the known problems associated with digital currency use.

It has effectively been referred to as a form of crypto-currency. Each transaction once it has been successfully validated is permanently stored in what is known as a block chain. This block chain is then stored in a public ledger which will typically show the users of the bitcoin currency and how many Bitcoins that specific person has and their prior transactions.

Through a network of privately owned computers, scientific calculations are conducted to authenticate the various transactions completed by each user. The network operators behind these private computers are known in the Bitcoin community as miners. These miners because of their service within the industry are rewarded with newly mined bit coins and transaction fees relative to successfully completed sales.

One such mining software used by bitcoin miners is the Guiminer.

Mining software provides a graphical user interface for the miner that allows the operator to control several applications relative to mining.  Mining programs are available for Microsoft Windows and also Linux users. Users who have never before used bitcoin must preinstall a bitcoin client to acquire a bitcoin address ad wallet.

After successfully installing the bitcoin wallet the user will download the client software for their relative operating system which will also install the necessary block chain.

It is recommended that most beginners to bitcoin mining join a specific group of users to combine their efforts to maximize their monetary gain. Such groups are known as pools. Bitcoins are awarded in increment blocks of 50, which for the average miner on their own will be very difficult to achieve.

Within the bitcoin pool, each user is given a smaller algorithm to process. When combined as a group, miners will be able to work together to solve much larger algorithm problems and to share Bitcoins achieved within the group.

The hardware that a Bitcoin miners has setup is called a Bitcoin mining rig.

Hardware ASIC Miners or Application Specific Integrated Circuit miners were specifically designed for the sole purpose of mining Bitcoins.

Though widely used among bitcoin miners, advanced hardware is generally not recommended for the beginner but rather for the more advanced user.  One bitcoin core developer was able to recover the cost of his ASIC machine within a week after purchase.

The bitcoin mining challenge is to do it profitably which can be calculated by using a Bitcoin calculator.  First you need computer hardware and second you need electricity which both costs money.  The equipment also produces heat which can either be good or bad depending on your climate or air conditioning needs.

For the average internet user who is interested in using this crypto currency to complete their online purchases are generally assigned a single or multiple bitcoin address depending on their requirements.

It is through this particular function that the public ledger is identified as a vital role in bitcoin transactions. Each user can obtain their bitcoin wallet through the use of various applications or apps easily downloaded to their mobile devices, personal computers or even paper tokens. Bitcoins can easily be spent, traded and converted to other traditional world currencies.

Purchases conducted using a mobile device are completed with the use of specific and easily obtained Quick Response codes otherwise known as matrix barcodes to simplify their transactions.

The bitcoin is currently in high demand and has appreciated in value relative to other currencies including the British pound, the Euro and the US dollar.

Due to it’s seemingly large fluctuations in value on currency exchanges (currently 1 Bitcoin = USD $207.75), the credibility of bitcoin trading has been a controversial subject.

Bitcoin investments have often been referred to as investments lacking in intrinsic value as the value of such investments are solely dependent on the users enthusiasm to accept it.

Bitcoin mining, although a risky venture is considered a viable home based business for many people looking to make an additional income from home.

 

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