The How Bitcoins Are Made Diaries

Let's say you had one legit $20 and one really good photocopy of that same $20. If someone were to attempt to spend both the true bill and the imitation one, someone that took the problem of looking at either of those bills' serial numbers would see that they had been the same number, and thus one of them had to be false.

That isn't a great analogy--we will explain in more detail below. .

Once a miner has confirmed 1 MB (megabyte) worthiness of Bitcoin transactions, they are eligible to win the 12.5 BTC. The 1 MB limit was set by Satoshi Nakamoto, and is a matter of controversy, as some miners believe the block size should be increased to accommodate more information.

Note that I stated that verifying 1 MB value of transactions makes a miner eligible to earn Bitcoin--not everyone who verifies transactions will receive paid off.

1MB of transactions can technically be small as 1 transaction (although this is not in any way common) or several thousand. It depends on how much information the transactions consume.

In order to earn Bitcoin, you need to meet two conditions. One is a matter of effort, one is a matter of luck.

2) You must be the first miner to arrive at the right answer to a numeric problem. This practice is also known as a proof of work.

The good news: No advanced math or computation is involved. You might have heard that miners are solving challenging mathematical problems--that is not true at all. What they are doing is trying to be the first miner to come up with a 64-digit hexadecimal number (a"hash")  which is less than or equal to the hash.

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The bad news: Since it is guesswork, you need a lot of computing power in order to get there first. To mine , you need to get a higher"hash speed," that is quantified in terms of megahashes per second (MH/s), gigahashes per second (GH/s), and terahashes per second (TH/s).

If you want to estimate how much Bitcoin you can mine with your mining rig's hash pace, the site Cryptocompare offers a helpful calculator.

Either a GPU (graphics processing unit) miner or an application-specific integrated circuit (ASIC) miner. These can run from $500 to the tens of thousands.  Some miners--especially Ethereum miners--purchase individual graphics cards (GPUs) as a low-cost way to cobble together mining operations.  The photo below is a makeshift, high-tech mining machine.  The graphics cards are those rectangular blocks with whirring circles.  Note the sandwich twist-ties holding the graphics cards to the metal rod.

Example: I tell three friends I'm thinking about a number between 1 and 100, and that I write that number on a piece of paper and seal it in an envelope. My friends don't need to guess the exact number, they simply have to be the very first person to figure any number that's less than or equal to this number I am thinking of.

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Let us say I'm thinking about the number 19. If Friend A guesses 21they lose because 21>19. If Friend B supposes 16 and Friend C supposes 12, then they have both theoretically arrived at workable answers, since 16<19 and 12<19. There is no"extra credit" for Friend B, even though B's answer was closer to the target answer of 19. .

In Bitcoin conditions, simultaneous answers happen frequently, but in the end of the day there can only be one winning answer. When multiple simultaneous answers are presented which can be equivalent to or less than the target number, the Bitcoin network will decide by a simple majority--51 percent --that miner to honour. Typically, it's the miner that has done the work, i.e.

The losing block then becomes an"orphan block" .

Now imagine that I pose the"figure what number I am thinking of" question, however I am not asking only 3 friends, and I am not thinking of a number between 1 and 100. Instead, I am asking millions of prospective miners and I am thinking about a 64-digit hexadecimal number. Now you see that it is going to be quite difficult to guess the ideal answer.

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The number above has 64 digits. Easy enough to understand so far. As you probably noticed, that number consists not just of numbers, but also letters of this alphabet. Why is that

In order to understand these letters are doing here in the middle of numbers, let us unpack the term"hexadecimal."

As you know, we use the"decimal" system, which means it is base 10. This in turn means that each and every digit has 10 chances, 0-9.