Gpu Cloud Mining for Dummies
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Chances are you hear the term bitcoin mining and your mind begins to wander to the Western fantasy of pickaxes, dirt, and striking it rich. As it turns out, that analogy isnt too far off.
Far less glamorous but equally uncertain, bitcoin mining is done by high-powered computers that solve complex computational math problems (read: so complicated they cannot be solved by hand). The fortune and work demanded by a computer to solve one of these problems is the equivalent of a miner striking gold in the ground while digging in a sandbox.
The end result of bitcoin mining is twofold. First, when computers solve these complex math problems on the bitcoin networkthey create new bitcoin, not unlike when a mining operation extracts gold from the ground. And second, by solving computational mathematics problems, bitcoin miners make the bitcoin payment network trustworthy and secure, by verifying its transaction information. .
Theres a fantastic chance all of that only made so much sense. In order to explain how bitcoin mining functions in detail, lets begin with a process thats a little bit closer to home: the regulation of printed currency.
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Consumers tend to trust printed currencies, at least in the United States. Feeling because the U.S. dollar is backed with a central bank called the Federal Reserve. In addition to a host of other responsibilities, the Federal Reserve modulates the production of new money and prosecutes the usage of counterfeit currency. .
Even digital payments using the U.S. dollar are backed by a central authority. When you make an online purchase using your debit card or charge card, for instance, that transaction is processed by a payment processing company like Mastercard or Visa. In addition to recording your transaction history, these companies affirm that transactions are not fraudulent, and that's one reason your debit or credit card could be suspended while traveling. .
Bitcoin, on the other hand, is not regulated by a central authority. Instead, bitcoin is endorsed by millions of servers throughout the world known as miners. This network of computers plays the identical function as the Federal Reserve, Visa, and Mastercard, but with a couple of key differences. Like the Federal Reserve, Visa, and Mastercard, bitcoin miners record transactions and check their accuracy.
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When someone makes a purchase or sale using bitcoin, we predict that a transaction. Transactions made in-store and online are documented by banks, point-of-sale systems, and physical receipts. Bitcoin miners achieve the exact same effect with no institutions by clumping transactions learn this here now together in blocks and adding them to a public document called the blockchain. .
When bitcoin miners add a new block of transactions to the blockchain, a part of the job is to ensure that those transactions are true. (More on the wonder of how this happens in a second) In particular, bitcoin miners make certain that bitcoin are not being duplicated, a unique quirk of electronic currencies called double-spending.
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Once you spend $20 in the shop, that bill is in the clerks hands. With electronic currency, however, it's a different story. .
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If the numbers were identical, then the clerk would know the money had been replicated. This analogy is similar to what a bitcoin miner does when they verify new transactions. .
With as many as 600,000 purchases and sales occurring in a single day, however, verifying each of those transactions can be a lot of work for miners, which gets at one other key difference between bitcoin miners and the Federal Reserve, Mastercard, or blog here Visa. As compensation for their efforts, miners are awarded bitcoin whenever they add a new block of transactions to the blockchain.
In 2009, it was 50. In 2013, it was 25, at the time of writing it is 12.5, and sometime in the center of 2020 it will halve to 6.25. .
At this rate of halving, the entire number of bitcoin in circulation will approach a limit of 21 million, making the currency more scarce and valuable over time but also more expensive for miners to produce.
Here is the catch. In order for bitcoin miners to really earn bitcoin from verifying transactions, two things must occur. To begin with, they need to verify 1 megabyte (MB) value of transactions, which can theoretically be as small as 1 transaction but are far more often several thousand, depending on how much information each transaction shops.