The Blockchain Diary

Dive into a treasure house of technology informations about Blockchain, Bitcoin, Altcoins, Cryptocurrency and lot's more.

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Bitcoin And Cryptocurrencies

The world of cryptocurrencies is abuzz with curiosity and excitement, and Bitcoin’s success is a quintessential example of what to expect in the crypto world.

What is cryptocurrency?

Cryptocurrency is nothing but a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Bitcoin is one such example of cryptocurrency.

What is Bitcoin ?

Bitcoin is a crypto-currency or software that forms a decentralized, peer-to-peer, world-wide payment system, without the control of any centralised authority.The blockchain software resides on thousands of computers, all over the world and is maintained by a mix of ordinary people and more sophisticated computer experts, collectively known as ‘miners’. Bitcoins are transferred via a peer-to-peer network between individuals, with no middleman

The unit of account in this system is ‘Bitcoin’. A ‘Satoshi’ (named after its creator) is the smallest amount within bitcoin, representing 0.00000001 bitcoin, i.e. divisible down to 8 decimal points.

The bitcoin network runs on a software system called ‘blockchain’. The blockchain software can be used to store and send anything of value, so there are companies using it to store documents like property deeds, etc. Blockchain as a technology is becoming popular among banks and other big financial institutions, who want to use it to settle payments on their back-end systems.

Bitcoin can be converted into ordinary currency based on its value on that date, or even used to make purchases from sellers that accept bitcoin.

The bitcoin blockchain by itself is very secure, but the bitcoins can be stolen from an account by stealing log-on and password info, i.e. ‘private key’ of the account holder and the bitcoin can be sent to another account controlled by the thief. Once bitcoin is transferred, it can’t be recovered (Bitcoin Transactions are Irrireversible).

There are two guys, let's say X & Y .

X wants to transfer $100 to Y.

So, X goes to his bank in L.A. and transfers $100 to Y's bank account in New York .

Now, the bank cashier will make a note of the transaction, either in a cash register or an online data sheet. He will give it a transaction number, and also note down the name of the two parties involved.

Understand the fact that whenever you transfer money, the bank is the third party which gets involved to note down the credentials of the transaction.

What if there was no bank required to make a transaction?

So, when X transfers money to Y through Bitcoins, all the information related to it is handled by a blockchain.

A block chain is a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.

It is a continuously growing list of records, which has the time stamps and transaction data.

Now, to maintain the block chain, or the list of records you need a network. A network of people who ensure the transactions are securely taking place and there is no disparity.

These people are our miners, who use their processing power to maintain security of block chains and to ensure that they keep working properly.

Miners are rewarded as well when they help maintain the block chain system.

So, basically, Bitcoin as a digital currency eliminates the need of a third party like a bank server, and makes it decentralized. Nobody controls the movement of money this way.

How The Bitcoin Is Created?

Being a distributed system with no central point of failure, have you've ever wondered

where Bitcoin comes from? and how it goes into circulation?

The answer is that it gets “mined” into existence.

What is Bitcoin Mining?

Bitcoin operates as a peer-to-peer platform. This peer-to-peer platform generates Bitcoins through Bitcoin mining.

Why do we need Bitcoin mining?
We need it because there’s no central government managing Bitcoin. Typically, a central government issues new coins for a currency. The U.S. Mint issues U.S. dollars, for example.

With Bitcoin, there’s no Bitcoin mint. There’s just Bitcoin users. That’s what makes it a peer-to-peer currency.

Bitcoin users generate new Bitcoins by running specialized software on their computers. This software solves math problems (Bitcoin algorithms).

The more math problems that computer can solve, the more Bitcoins that user will generate. Computers solve these problems using their processing power: the more processing power you have (like in your GPU and CPU), the more Bitcoins you’ll be able to mine.

As more and more Bitcoin users run their mining software, the math problems become harder and harder to solve. This keeps the growth of Bitcoins at a steady pace – which means the currency won’t suddenly collapse if a million people downloaded and install Bitcoin mining software.

The difficulty of Bitcoin mining doesn’t change on-the-fly. Instead, it changes about every 2 weeks based on the changing computational power of the Bitcoin network.

Now that you got a brief overview of what it is. Lets jump in-depth and see how it works.

Bitcoin mining is the process by which the transaction information distributed within the Bitcoin network is validated and stored on the blockchain. Bitcoin mining serves to both add transactions to the block chain and to release new bitcoin

Bitcoin Mining Requirements?

You can Mine bitcoins in two ways

1.Hardware Mining

If you budget of somewhat around $2000 to $5000 you can get miners like Antiminer S7 or S9 which will give you great hash rate to mine bitcoins
It generates good profit if you have large amount of money to invest and low cost electricity
i.e. This process is very expensive and time consuming<

2.Cloud Mining

Managing mining hardware at home can be hectic, considering electricity costs, hardware maintenance, and the noise/heat generated by dedicated hardware that has to be run in data centers. Because of the high energy costs for running a powerful Bitcoin miner, many operators have chosen to build data centers known as mining farms in locations with cheap electricity. To ease the stress of mining, these operators dedicated to renting out their mining hardware for a service called Bitcoin cloud mining.

As innovative as the idea may sound, it is essential to know that there are both advantages and disadvantages to Bitcoin cloud mining.

Some of the advantages include:

It removes cloud factors such as investing in Bitcoin mining hardware, having it shipped to your door for a fee, and running the risk of paying VAT on top of all that.

There are no settings to worry about, as nearly every Bitcoin cloud mining provider will automatically point your rented hardware to a Bitcoin mining pool.

No shipping costs and VAT risk to take into account, Bitcoin cloud mining seems to be a safe bet when it comes to entering the mining scene.

What Are Bitcoin Mining Pools?

Early in the days of Bitcoin, it was possible for one miner to mine a steady number of Bitcoins on his or her own.

As Bitcoin has become more popular, however, the algorithm has proven too difficult for single miners to handle. That’s why miners have started joining Bitcoin mining pools.

Bitcoin mining pools push the processing power of multiple computers together to solve Bitcoin algorithms. Each miner in the pool receives a share of the Bitcoins being mined. That share is proportionate to the amount of processing power input into the pool.

Another advancement in mining technology was the creation of the mining pool, which is a way for individual miners to work together to solve blocks even faster. As a result of mining in a pool with others, the group solves many more blocks than each miner would on his own. Bitcoin mining pools exist because the computational power required to mine Bitcoins on a regular basis is so vast that it is beyond the financial and technical means of most people. Rather than investing a huge amount of money in mining equipment that will (hopefully) give you a return over a period of decades, a mining pool allows the individual to accumulate smaller amounts of Bitcoin more frequently.

Join a Bitcoin mining pool. There are thousands of Bitcoin mining pools on the internet today. If you don’t join a pool, then you’re probably never going to make any money from Bitcoin mining. The algorithms are just too difficult for single users to solve and you’re unlikely to be awarded.