Cryptocurrencies are electronic (digital) assets that were created as a parallel medium of currency exchange. The first open source cryptocurrency was Bitcoin (₿) released in 2009.
Invented by Satoshi Nakamoto Bitcoin soon became extremely popular and today is the most successfully traded cryptocurrency worldwide.
Starting With Bitcoin Mining Basics
Compared to a centralized banking system where traditional currencies are regulated and produced by a federal reserve entity, bitcoins are created through a systemic process called Bitcoin Mining, based on a decentralized (peer to peer) approach requiring the assets to be controlled and administered by multiple entities.
Bitcoin mining is performed by dedicated hardware and high-powered computers using mining software (applications) that equates, computes and validates strict cryptographic algorithms.
Mining is the validation of transactions, and the validity of every bitcoin is controlled through a distributed blockchain (log of records).
How Does Bitcoin Mining Works
Bitcoins being decentralized in nature lacks a centralized database to keep track of existing bitcoins and new, therefore, the log of every transaction is distributed across a public ledger (network) through blockchain.
Every transaction is recorded as files called block and a linear sequence of organized blocks is known as the blockchain. To avoid inconsistencies and double spending bitcoin implements a confirmation mechanism every 10 minutes called Hashcash Proof of Work system. Bitcoin blockchain uses SHA-256 (Hash Algorithm- 256 bits)
To mine a block a miner needs to successfully hash it. Hashing is transforming Input data (strings of characters) into short keys/values (64 digits starting with eighteen zero's) that represent the original target input (string). The reward value of a single successfully mined block is 12.5 Bitcoins that halves every 2.10 lac new blocks are discovered.
As new blocks are mined, the difficulty of modifying a block increases with passing time making bitcoins more secure to theft or forgery. The aftermath results in adding new bitcoins block into the system for mining. the blockchain serves to validate all potentially legitimate transactions distributed throughout the network.
What Bitcoin Mining Requires
Bitcoin mining was intentionally designed to resource intensive. The beginning was marked using traditional hardware like CPU (Central Processing Unit) and soon transitioned to high end driven GPU (Graphical Processing Unit) and ASICs (Application Specific Integrated Circuit). The parallel AMD Radeon GPU attributed to approx 80% - 100% increase in bitcoin mining power compared to regular CPU.
Bitcoin MIning today has evolved with the acquisition of custom hardware designed specifically for the process. ASIC's a collaborative system of chips has revolutionized the bitcoin mining experience by providing the extreme computational power of up to 19.0 TH/S to solve complex hashing algorithms.