Bitcoin Mining is the process of creating and writing new blocks for the blockchain. These blocks have to comply with the base Bitcoin rules, maintained by the network.
In order to mine, you would need specialized mining software and hardware, which you can learn about on the previous page of this guide. Here we will focus on the process of Bitcoin Mining to explain what is happening, and why it works.
For miners, it all starts with the most recent block registered on the blockchain. To begin the mining process, they need to copy its hash. Beyond this hash, they also acquire a block of validated transactions created by full nodes across the network and begin their work on the proof of work. Proof of work is a correct SHA256 hash.
In order to find a correct hash, miners take a look at the network difficulty for the current batch of 2016 blocks. This difficulty is the deciding factor in the hashing process, which determines how difficult the hash must be in order for it to be accepted by the network. As an end product the hash requirements set by the network only accept hashes starting with a specific number of zeroes “0” before other characters in the 64 character hash.
The hashing process takes a while, but as soon as one correct hash has been discovered, the block is bundled and broadcast to the network. The network reevaluates and all miners rehash the block with the specific nonce they’ve received from the initial finder of the hash. They all reach the same conclusion, that the hash is correct and the mining process for this block is concluded.
The mining reward, together with the fees for transactions are given to the miner from which the correct hash originated.
As this happens, the new block is accepted by the network and the transactions will forever be etched in the blockchain. After this validation, miners carry on to repeat the process.
Miners retrieve the latest block (the one that we just finished) copy over the hash and transaction data from the full nodes and they start mining for a new hash for this next block.
Creating this proof of work (POW) is an energy intensive process that takes up a lot of computing power and time, as well as electricity. All of the miners are working on the same block at any given moment, and they are compiling the same information. Except for the “nonce”, as this is an arbitrary number that is changed in order to eventually discover a viable hash.
This process deeply secures transactions in the network and essentially disables any party the possibility to change transactional history. Although this is theoretically possible, such would be attackers would have to overpower the entirety of the legitimate miner network and bring incredible amounts of hashing power to the table.
In summary, the process goes like this:
In this part of the guide, you can learn more about everything that’s got to do with the first digital currency, Bitcoin.
What is Bitcoin?Before getting to understand what all the fuss is about, you need to understand some basics when thinking and talking about Bitcoin. There are a lot of misconceptions, which is normal considering the rapid growth of this currency. Simply by being here, you are qualifying yourself as a person that’s willing to learn more about Bitcoin and how it works.
Satoshi NakamotoThe creator of Bitcoin. Not much is known about this mysterious figure, but there have been speculations about the nature of his true identity. Here you can discover the information regarding this elusive person which has evaded discovery even though his child has grown popular over the years.
Pros and Cons for BitcoinWhile it’s easy to be either for or against Bitcoin it’s important to take a sensible approach with logical reasoning when thinking about acquiring Bitcoin. Is it really for you, and will it help you accomplish your own goals? The best way to do this is to know more about the currency, it’s weak and strong points.
Bitcoin CoreThis is the peer to peer software that enables the blockchain network to function properly. It collects, verifies and broadcasts information about blocks and transactions. Every computer around the world running this software is hosting a full copy of the distributed ledger and is considered a full node. This software also functions as a Bitcoin wallet for you.
Storing BitcoinWhile you may think that Bitcoin is for you, let us stop you for a moment. Owning Bitcoin is different than traditional (fiat) currencies. Bitcoin as a currency is incredibly secure when it comes down to getting the money to specific wallets, but as an individual, you can easily compromise the security of your wallet. Read this article to add more to your information arsenal and learn how to protect both your wallet and Bitcoin.
Choosing the right wallet�In order to hold and utilize the full potential of Bitcoin, you’re going to need a wallet. They are unique pieces of software created for the sole purpose of holding and facilitating Bitcoin transactions. They will allow you to sign up with many Bitcoin-related services that ask for your Bitcoin Address.
We’ve prepared a small article that details most of the options available to you as an individual. Here you can find out more about the wallet possibilities that you have for mobile, desktop and even hardware wallets.
It’s important to pay attention to a few security pointers and you should always opt-in for two-factor authentication like we’ve mentioned in the previous article of this guide.
Buying BitcoinIn this article, we talk about the different options you have, that you can utilize to purchase Bitcoin through. Credit Cards, Cash Trades.Depending on where you are in the world, different purchase methods are available for you. We are here to help by supplying you with relevant information in order for you to make the right decision.
Furthermore, we name a few of the exchanges and the regions they operate in. Practice due diligence and strongly consider researching currency exchanges, as well as their policies and process before you deposit any Bitcoin or Cash with them.
Bitcoin ForumsJust like many other communities, Bitcoin holders utilize a forum in order to communicate in an organized and efficient manner. Unlike other interest groups, Bitcoin’s community is incredibly active and constantly generates engaging conversations. Everybody is invited to join in on the discussion, so don’t hold back. Read this article to learn more and create an account with a forum of your choosing. It is considered one of the best ways to learn about Bitcoin since the community is very active.
Bitcoin LegalityDo you want to use Bitcoin for your business? Maybe you’re just wondering about the legal status of Bitcoin in your country. Unfortunately, since Bitcoin is a newcomer to the financial marketplace it does not have a legal status in many different countries. Here you can find the available information about the legality of Bitcoin in countries that have established a stance or laws about it.
Bitcoin HistoryWhether you like it or not, history is important. Here at www.crypto-news.net we highly value the lessons that we can learn by analyzing events in the past, so we’ve created a list that compiles the most important events in Bitcoin History. These events created the cultural values and stories of the Bitcoin community, so it’s kind of important to know them.
Early beginning�How did it all begin? Was Bitcoin a sure thing from the start or did it eventually reach this status by other means? This article takes a look at years 2008 and 2009 for the most important events that took place, including the creation of the first ever Bitcoin transaction as well as the first exchange rate for Bitcoin.
2010 to 2013As time passes by, Bitcoin grows in popularity. With this the number of influential events increases. Some funny things happened, like the first ever Bitcoin pizza purchase, and some not so interesting events transpire as well, as exchanges are faced with the brutal reality of hacking attacks.
2014 to 2016Exchanges learn and adapt to face the challenges of online hacker brutality. This period shows less and less successful hacking attempts and a resolution for many unanswered questions. All in all, a great period for Bitcoin with more and more vendors starting to accept this currency as a payment for their products and services.
This section will be updated on a regular yearly basis, as a recap of the most important events that transpired across the Bitcoin ecosystem every year.
Should you invest in Bitcoin?By now you should know enough about Bitcoin, what it is, how it works and how to safely store it. All of this information should be clear to you before making an investment into Bitcoin, so that you can have realistic expectations about this currency and what it’s potential is. We dedicate this article to work out the last remaining questions that will enable you to know if a Bitcoin investment is the right choice for you.
Free BitcoinIn the Bitcoin community, giving away is a natural thing to do. The first-hand experience is one of the best ways to learn what Bitcoin is and how to use it. In the ecosystem, there are websites that give away small amounts of Bitcoin in exchange for witnessing advertisements on their websites. These sites are called “faucets” which are imagined to drip small water droplets, or in this case Bitcoin. Many people in the Bitcoin ecosystem look down on faucets, but it really is the best way to get a free hands-on experience with Bitcoin.
There are are many different implications that arise through the existence of the Bitcoin Blockchain. This part of the guide serves to clear up misconceptions about the blockchain in general, how it works, and why it is considered secure.
In the end, you can also find a video that provides you with a visual representation of how the blockchain works.
It prevents double spendingDouble spending is currently considered as a financial attack that hopes to spend the same set of Bitcoin in multiple transactions. To prevent this, the blockchain uses transaction validation. By referencing the previous financial history of Bitcoin, before realizing a transaction, the network rechecks the validity of said transaction. It checks whether the address has the amount of Bitcoin that it’s trying to send and whether the address has already spent the coins or not. The whole network communicates to find out the truth, and the transaction is processed after every full node reaches consensus.
This, in turn, provides a strong defense against double spending attacks and denies would-be attackers the possibility of realizing their fraudulent goal.
Publicly stores all dataThe Bitcoin blockchain stores all data publicly available. Anyone can download the whole history of Bitcoin transactions, or parts of it. It can be used to research social tendencies or improve the understanding of human consumption. Note that not every blockchain is publicly available. Through the use of proper cryptography, blockchains can be restricted to provide data only to selected few that hold the correct key. While this is not the case with Bitcoin, it provides an answer to the question. Can Blockchains be implemented to store confidential data?
Can Blockchains be implemented to store confidential data?
Yes, they can. But for the purposes of this guide, we will continue to focus on public blockchains.
Beyond BitcoinBlockchains have a massive potential to be utilized in many aspects of human life. The ever long issue of government corruption and tax evasion charges can be eliminated through the uses of Blockchain. Identification, medical records, and even tax collections can be stored publicly (or privately).
One curious implementation of Blockchain technology for tax collection can be utilized to ensure that taxes are being used in a constructive way. It could also provide citizens with enough transparency to trust their governments or evidence when their taxes are used unlawfully.
Blockchains, if implemented correctly can prove to be the best tool that humanity has to solve its own moral issues.
Visual representation of BlockchainsMost of us are visual creatures and learning through some form of visual material is scientifically proven to boost student engagement and information retention. This video below is one of the best visual representations that we can find on the internet.
It is 17 minutes long, but it should be highly useful if you’re looking to enhance your understanding of blockchains. A lot of thanks to the creator of this amazing representation.
The blockchain consists of many blocks connected to one another by unique hashes called Proof-of-Work. These hashes are created by the process called mining.
Here we will detailly examine a random block on the blockchain and talk about the various bits of information that is contained in each and every one of them.
You can use any blockchain explorer to examine the Bitcoin blockchain, individual blocks and the information that is written in them. One of the most popular blockchain explorers is Blockchain.info.
We will take a look at Block #448811 and all of the information that is contained in it.
Block HeaderThis 80kb header is unique to every block and contains:
The Merkle root hash although currently not used, is going to be an important hash in the future. It represents the transactional history up until the block which we are reviewing, so the hash, in this case, represents the whole transactional history and the Block #448811. In the future, these Merkle hashes will be used to enable correct transactions without the need to fully download the blockchain.
Block InformationBeyond the block header, we get to the very important information that correlates to the transaction history of Bitcoins in the block.
Blockchain explorers produce summaries such as these to provide general information about the block you’re looking at.
Number Of Transactions2731
Output Total5,259.18648908 BTC
Estimated Transaction Volume1,492.90005033 BTC
Transaction Fees0.67787295 BTC
Height448811 (Main Chain)
Received Time2017-01-18 16:01:26
Block Reward12.5 BTCLet’s go over and explain these terms you can find here. This way we can build upon our knowledge and understanding of the fundamental building blocks of the blockchain.
The Number of transactions is the total number of transactions that have been written in the block.
Output Total is the total amount of Bitcoin that is held by the addresses that made transactions in the block. Since it’s quite common for addresses to not spend all of their Bitcoin on a single transaction, the system needs to create at least two transactions. The first one is the transaction to a new address and the second one in a transaction back to the sender.
Estimated Transaction Volume is the total number of Bitcoin that was sent to an address different to the sender.
Transaction Fees� represents the total amount of fees that are paid to the miner, along with the reward.
Height� is the value given to this particular block in the chain.
Time Stamp and� Received Time� are usually one an the same, representing when the block was finished and uploaded to the explorer.�
Relayed by represents the miner that finished the hash for the block and sent it to the network. This is usually a mining pool nowadays, as finding the right hash is extremely difficult.
Difficulty represents the value of network difficulty which is recalculated every 2016 blocks or rather two weeks. This value defines which hashes are currently accepted by the network.
Bits and Size� represent the size of the block in bits and Kbytes respectively. Right now the size of the blocks is limited to 1 Megabyte, so this means that as soon as the current block reaches 1 Megabyte, mining for its hash has begun.
The� Version value represents which version of Bitcoin has been used to generate the block. As time passes, developers create updates for the Bitcoin clients in order to improve certain features.
The Nonce� is the variable value that is used to generate the necessary proof of work hashes. The miners change this value in order to generate a valid hash and they share it afterward so that nodes and other miners across the network can recreate the hash and validate the block.
Block Reward� represents the BTC reward to the miner that successfully solved the block and expresses the value of the reward granted to the miner.
Beyond this summary, in the block information, all of the transaction information is contained and properly linked to. There are records of which addresses sent how many Bitcoin to where, as well as the number of confirmations for every transaction.
This information is available for every transaction in the block.
While not overly useful for humans to analyze the blockchain, it is required so that the autonomous code can correctly link all of the information about Bitcoin holders in the Blockchain database.
While Bitcoin mining is widely recognized as the main contributing factor towards the creation of new Bitcoin, as well as transaction validation, for the majority of users this process is quite obscure.
This part of the guide is designed to answer your questions about Bitcoin mining and related subjects.
What is Bitcoin MiningGeneral introduction towards Bitcoin Mining, explaining the possibilities for you to get started with it, as well as covering the basic concepts such as proof of work, incentive, and block rewards.
The Process of MiningAn in-depth explanation of the mining process and how it correlates to other aspects that comprise the Bitcoin network, such as nodes, blockchain and a summary of why this process ensures transactional safety.
Mining SoftwareIn order to mine, you would need to use special bitcoin mining software which has the capabilities to generate “proof of work” hashes according to the authentic parameters for the bitcoin network.
Mining HardwareBeyond software, you also need specialized Bitcoin mining hardware in order to be a competitive miner in the current environment. You can learn more about the main manufacturers of Bitcoin Miners and additional details about the technology they produce.
Cloud MiningWhile you could buy Bitcoin mining hardware for yourself and set it up in your home, office, or mining farm, this process is incredibly expensive. Another potential solution is cloud mining, which means to purchase mining power from a farm and reap both the costs and rewards that your machine generates in the remote location.
Mining PoolsSince the current mining difficulty is very high, some people choose to collectively mine Bitcoin and share the rewards based on the amount of work each individual miner provided into finding the hash for the current block. Usually, cloud miners are automatically enrolled in mining pools and not every company out there allows for complete control over your miner.
If you own your own mining hardware, you can manually choose which pool you want to participate in, if any.
Following the development of civilization, trading is the sole factor in the creation of currency, in order to facilitate the process. Without it, trading means exchanging one good for another, but through the use of currency, people can trade currency for goods and vice-versa.
Today trading takes place through the information technology widely available through the world, as well as physically buying and selling in exchange for fiat currency.
Here you can find information about modern trading and all necessary information to get you up on your feet if you’re considering to start trading.
Beyond the general information about trading, we have a part on the bottom that’s focused on the trading with Bitcoin. Although useful, a lot of the information in the in-depth guide is very valuable for new and experienced traders as well.
Trading introduction�General introduction into trading, explaining the necessity, as well as the modern ways that it’s being done today. You can learn more about the different trading styles, the business of trading in general. Overall, it’s a good source of information if you want to build a foundation of trading knowledge.
Trade Order TypesToday trading through an automated fulfillment of ordered, which are instructions for the exchange on what to do. By setting up your orders correctly, you can save yourself from quick devaluations of the good that you’re trading with.
Trading Technology�Constantly evolving, technology is the fundamental reason anything changes these days. This chapter looks upon the modern trade tech, as well as providing a brief history of how contemporary trading has evolved over the course of the last 30 years.
Trading Plans and development�In order to be successful with trading you need to have a plan. Trading isn’t lucky guessing or gambling, although some people treat it this way. In this chapter you can learn more about what trading plans are and how to develop them yourself.
Testing Trade PlansAfter creating a plan for trading, it is essential to test it in order to establish a baseline expectation about the return on investment. Testing your trade plans enables you to form realistic, or as close to real expectations about the outcome of your trade activities.
Bitcoin Trading�While trading is the universal language of commodity exchange between people, every market where people trade has a different culture. Trading with Bitcoin is different than trading with other commodities. Here you can learn specific information about Bitcoin Trading.
Bitcoin Exchanges�Once you’ve considered whether Bitcoin trading is for you and you’ve decided that it really is, then the next step is to learn more about the Bitcoin exchanges that are available for you. Following this link will lead you to a list of reviews that we did on the various exchanges around the internet and will serve as a great starting point for your bitcoin trading activities.
Continue Learning about BitcoinThe journey doesn’t stop here. Trading is but one part of the entire Bitcoin ecosystem. An important one, of course, but understanding the technology, its potential and the implications that arise from its use are important as well. So if you haven’t already explored other parts of the guide, we suggest having a look at them, or if you already have you can assist us in improving this guide by partaking in the community survey that we’ve prepared for you.
Making transactions with Bitcoin is a breeze most of the time. There are some common problems that you can run into, but we will get to that later on. For now, let’s focus on the things that you need to know to make your first Bitcoin transaction.
WalletsEach and every Bitcoin wallet out there is equipped with the tools you need to facilitate transactions. To get started, you need to know how much Bitcoin you want to send and you also need an address to send them to. You also need to have some Bitcoin that you’ve purchased, mined or earned in some other way.
FeesAfterward, you will need to set a transaction fee. This is the fee that is used to incentivize miners to mine a block. The optimal value is constantly changing, so it’s quite useful to use an online Bitcoin fee tool to help you determine the fees for your transaction. Your wallet may also provide you with a suggested fee, but not all of them do.
SpecificsBitcoin transactions are one-way! This means that you cannot request a chargeback or make changes to the details in the transaction. Once it’s sent, it’s gone. Make it your habit to double check every transaction you want to make, before you make it. This will ensure that you have everything covered on your end and can save you a lot of trouble in the long run.
After sending the transaction, it is transferred through the node network, where it is checked, validated and placed in the collective memory of the network. At this point, your transaction will be visible in the wallets of both payer and payee as unconfirmed.
Once miners create a valid POW, a whole batch of transactions is included together with this information to create a block, which is broadcast to the entire network, node by node. Every node, after confirming the block, broadcasts it deeper into the network. The nodes usually reach the same conclusion,
Bitcoin Transaction DiagramWhen making Bitcoin transactions it is up to you as the receiving party to decide how many confirmations are necessary before the transaction is deemed valid. Most vendors opt-in for 3 confirmations, but you can go as long as you desire.
Transactions are more impervious to double-spending attacks if they are older since this requires any attacker to have a significant amount of hashing power in order to outperform the rest of the network. This is unlikely, due to the competitive nature of Bitcoin Mining.
Common ProblemsSometimes there are certain situations that can be perceived as problems by both the payer and payee. These are often symptoms showing slow validation of a transaction, a transaction not appearing at all. Other times, a transaction appears, gets validated and afterward disappears (only to reappear a few days later)
Let’s have a look at the most common causes of these symptoms:
The two other common situations are unfortunately unavoidable once they happen.
If the network is overloaded, it’s going to take some time for the transactions to finalize. You can speed up the process by paying a higher fee, which will ensure that miners will prioritize your transaction.
Orphan BlocksThese are blocks that are completely valid, contain correct POW hashes, but due to a longer chain following a different hashing structure are dropped by the network. Although it rarely happens, this can cause transactions to be stuck in what I like to call “Bitcoin Limbo”, appearing and disappearing from the wallet over the course of a day.
Most of the time though, your transaction will already be confirmed in the longer blockchain, so it won’t be a problem at all. This is just informational so that you understand what is happening if you see a transaction going from confirmed to unconfirmed.
You can mediate this situation by agreeing to wait for a certain period of time, or by requesting another payment once the initial payment has disappeared from your wallet. This can inadvertently cause the first payment to be considered as a double-spend.
The main suggestion is to wait out for a period of time, or until the transaction reappears in your wallet. This will happen once the network picks up your transaction and places it into a block.
Bitcoin is the revolutionary digital currency that slowly, but surely changes the financial landscape of the world. As new people join this global community, they are often met with information that’s either invalid or misinformative in nature.
This is the main reason for the creation of this Guide, which hopes to establish itself as an authoritative open-sourced content product that will satisfy the informational needs of people interested in Bitcoin, all across the globe.
Here you can find all the information that you need about Bitcoin, Blockchain, Mining and Crypto Trading. These are the main building blocks of the peer-to-peer financial system known as Bitcoin, and they work together to provide both efficacy and security for digital transactions.
As an additional benefit, this guide and the content is structured and organized in an easy to understand way. The guide is considered to be a community influenced product, and this means that your voice is valuable to us. For this reason, we’ve created a community survey, through which we gather valuable feedback to ensure the high quality of the information that is contained here.
We at www.crypto-news.net welcome you to the Bitcoin Master Guide.
BitcoinThe digital currency that rivals cash! Learn the Bitcoin basics, such as who is the alleged creator of this currency, or how Bitcoin is produced here. We’ve also a summary of important historical moments, like the first Bitcoin pizza purchase and how they have shaped Bitcoin and it’s community to the present state.
You can learn more about wallets and how to properly store your Bitcoin, to safeguard them against hacking attacks.
Bitcoin has generated a huge online following and a really active community. Learn more about how Bitcoin holders communicate with each other and where you need to go if you want to join the community.
We’ve also a summary of important historical moments, like the first Bitcoin pizza purchase and how they have shaped Bitcoin and it’s community to the present state.
BlockchainThe distributed ledger that is the Blockchain is an important tool in securing the financial history of Bitcoin. It records every Bitcoin ever released, as well as all of the transactions that have been made since Bitcoin started. This successfully solves the double spending problem that previous attempts for a digital currency have encountered.
Malicious attacks on the network are possible, also orphaned blocks might appear. In order to protect your long-term interest when making Bitcoin transactions, it’s important to wait for at least six network confirmations before deciding that the transaction is safe from an attack. You can consider waiting for additional confirmations in the case of a high-value transaction. As a rule of thumb, the security of any individual transaction is closely related to its age, with older transactions being far more resistant to change when compared to new transactions.
Additionally, learn more about the positive and negative implications of Blockchain technology and discover the future potential of this technology independent of Bitcoin.
MiningThe process of mining is essentially a cryptographic process that is energy-intensive. It is one of the most important features about Bitcoin that enables its operation. Miners receive a Bitcoin reward for completing a block, and they are competing to be the first ones to provide valid “proof of work” hashes to the network.
According to the rules of the network, Bitcoin mining takes place over 2016 block, which should be finished in exactly two weeks. The network compares the completion of this set of blocks against the target and modifies the network difficulty for the next ones. Essentially this means that mining blocks becomes either easier or harder as soon as 2016 blocks have passed.
Miners provide timestamps and they number the blocks consistently, so the network can easily keep track of the completed work and it changes the difficulty of mining accordingly.
You can learn more about this process here.
TradingJust like everything else, Bitcoin and other crypto-currencies are being actively traded on special markets. On these online exchanges, Bitcoin can be traded as an asset. Learn everything you need to know about trading and bitcoin trading specifically.
Here at www.crypto-news.net, we actively follow the markets and the news surrounding Bitcoin and other important crypto-currencies.
Community SurveyThis guide is created with a community-first mindset and this means that your feedback is playing a major role in the development of this guide. Since you’re reading this, it means we’ve already started gathering feedback from the community.
In order to give feedback on any part of this guide, you can either comment on specific posts or take part in this community survey. The results of the survey will be used exclusively towards the development of this information product.
We are proud to have developed this informational resource and we hope that it will provide many individuals with the information that they seek in order to understand Bitcoin and related technologies.
Community ContributionsFranky1 – Provided clarification on specific elements in the guide.
Share ItWe hope you enjoy this guide and share it with your friends that want to learn more about Bitcoin. Our goal is for this guide to fully equip any person with sufficient information to understand Bitcoin and related technologies.