BITCOIN: a new-age Digital Currency

What is Bitcoin?

Bitcoin is new-age digital currency used as medium of exchange which uses cryptography to control its creation and management. It’s decentralised in nature i.e., no central authority or institution controls its network and allows the users to spend the money anonymously. It involves transfer of currency by sending an e-mail or text message to a person using a wallet app and typing the details of recipient. It is called as cryptocurrency as it uses a different encrypted code for every single transaction. Cryptography is an art of writing and solving codes. Thus, each letter or word or any component of the language can be mapped to arbitrary characters, letters, pixels and numbers so that it is not readable without the proper key. One can use real money to buy bitcoins. Let’s understand bitcoin mining now.

What is Bitcoin Mining?

Bitcoin mining is a complex computing and mathematical process by which the bitcoin miners bring new bitcoins into the world and it is also a process of verifying and adding bitcoin transactions to the public ledger i.e., blockchain. The bitcoin mining process involves assembling a block of recent bitcoin transactions and attempting to solve computationally tough puzzles.

Mining software uses power and resources and computes numerous mathematical algorithms. It provides a reliable algorithm to the ledger to solve the complexity of maintaining it. The blockchain is kept consistent and complete by mining which repeatedly groups newly broadcasted transactions into a block, which are further broadcasted to the network and verified by recipients.

Requirements to Begin Mining Bitcoin

To start mining bitcoin, the following are required:

  1. Competitive mining computers (rigs)
  2. Low-cost power supply
  3. Mining software
  4. Mining pool membership

Observation

Things to consider before beginning bitcoin mining process:

·   In the Bitcoin network, Bitcoin halving is a necessary event that reduces the payout you will receive every four years. Let me share the previous historical data of Bitcoin halving incidents to make things clearer. In the first Bitcoin halving case, the amount of the payout received halved from 50 to 25. In comparison, it halved and in 2016, the incentive was just 12.5 BTC. The payout was also halved last year to 6.25 BTC per mining block of 1 Bitcoin. After four years, it will decline further to 3.125 BTC and begin thereafter.  Ok, how does it affect the miners of Bitcoin?

You will get just 6.25 BTC for mining 1 block of Bitcoin in 2021. Also, 21 Million bitcoins can be extracted out of which 18 Million Bitcoins has been extracted till date. As the competency grows in bitcoin mining, the mathematical algorithm will become more complicated which will result in less profit from mining.

  •     High Processing Device for e.g., Antiminers is another vital factor to consider. If you don’t have the set up for mining Bitcoin, you have to invest a lot of money because buying a single ASIC or GPU device cannot quickly solve them. So, if you don’t have a long-term plan, you can join a mining pool instead of investing in buying new devices. A mining pool is a collective group that crypto miners combine their mining resources to a single network to increase their computational power. The reward will also be divided based on the capacity you contribute to the mining pool.
  •   Power Consumption - You need to keep an eye on electricity consumption before considering Bitcoin mining. Since you need high processing devices for mining Bitcoins, they will consume more electricity.
  •    As we know, Central Government is finalizing a bill which will be tabled in parliament soon to ban cryptocurrencies (Including bitcoin) and they are going to introduce their own digital currency, they can impose fine to Individual and Corporates for using cryptocurrency.

Conclusion

The general interest in bitcoins as an investment and payment mechanism has risen several times in recent times, as bitcoin is the world's first cryptocurrency and is simple to exchange and manage. There is no central entity or trader that regulates or controls bitcoin mining or bitcoin transfers, rendering bitcoin an unsecured payment method. The blockchain platform is impressive and has the ability to improve the digital ecosystem under which the distributed ledger of bitcoin transactions is managed. Many nations have absolutely outlawed bitcoins, including bitcoins, but have adopted and used the blockchain technologies rather effectively with their digital transaction.

Rahul Raj

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