How does Bitcoin mine into real money?

How does Bitcoin mine into real money?

Mining is a process of increasing the Bitcoin money supply. Mining also protects the security of the Bitcoin system, prevents fraudulent transactions, and avoids “double spending”, which refers to spending the same Bitcoin multiple times. Miners provide algorithms for the Bitcoin network in exchange for the chance to earn Bitcoin rewards. Miners verify each new transaction and record them on the general ledger. Every 10 minutes, a new block is “mined”, and each block contains all the transactions from the previous block to the current time, and these transactions are added to the blockchain in turn middle. We call a transaction that is included in a block and added to the blockchain a “confirmed” transaction. After the transaction is “confirmed”, the new owner can spend the bitcoins he received in the transaction.

Miners receive two types of rewards during the mining process: new coins for creating new blocks, and transaction fees for the transactions included in the block. To get these rewards, miners scramble to complete a mathematical problem based on encryption hash algorithm, that is, use Bitcoin mining machine to calculate the hash algorithm, which requires strong computing power, the calculation process is much, and the calculation result is good Bad as proof of miners’ computational workload, known as “proof of work”. The competition mechanism of the algorithm and the mechanism by which the winner has the right to record transactions on the blockchain both keep Bitcoin safe.

Miners also receive transaction fees. Each transaction may contain a transaction fee, which is the difference between the inputs and outputs recorded by each transaction. Miners who successfully “mined” a new block during the mining process get a “tip” for all transactions contained in that block. As the mining reward decreases and the number of transactions contained in each block increases, the proportion of transaction fees in the miner’s revenue will gradually increase. After 2140, all miner earnings will consist of transaction fees.

Risks of Bitcoin Mining

· Electricity bill

If the graphics card “mining” needs to be fully loaded for a long time, the power consumption will be quite high, and the electricity bill will be higher and higher. There are many professional mines at home and abroad in areas with extremely low electricity costs such as hydropower stations, while more users can only mine at home or in ordinary mines, and electricity costs are naturally not cheap. There is even a case where someone in a community in Yunnan carried out crazy mining, which caused a large area of ​​the community to trip and the transformer was burned.

· Hardware spending

Mining is a competition of performance and equipment. Some mining machines are composed of more arrays of such graphics cards. With dozens or even hundreds of graphics cards together, various costs such as hardware prices are very high. There are considerable expenditures. In addition to the machines that burn graphics cards, some ASIC (application-specific integrated circuit) professional mining machines are also being put into the battlefield. ASICs are specially designed for hash operations, and their computing power is also quite strong, and because their power consumption is much lower than that of graphics cards, Therefore, it is easier to scale, and the electricity cost is lower. It is difficult for a single chip to compete with these mining machines, but at the same time, the cost of such machines is also higher.

· Currency security

Bitcoin withdrawal requires up to hundreds of keys, and most people will record this long string of numbers on the computer, but frequent problems such as hard disk damage will cause the key to be permanently lost, which also leads to lost bitcoin.

·Systematic risk

Systemic risk is very common in Bitcoin, and the most common is fork. The fork will cause the price of the currency to drop, and the mining revenue will drop sharply. However, many cases show that the fork benefits the miners, and the forked altcoin also needs the miners’ computing power to complete the minting and transactions.

At present, there are four kinds of mining machines for Bitcoin mining, they are ASIC mining machine, GPU mining machine, IPFS mining machine and FPGA mining machine. A mining machine is a digital currency mining machine that mines through a graphics card (GPU). IPFS is like http and is a file transfer protocol, while an FPGA mining machine is a mining machine that uses FPGA chips as the core of computing power. These types of mining machines have their own advantages and disadvantages, and everyone can choose them according to their own needs after understanding them.