When you deepen your understanding of Bitcoin (BTC), the word that always comes up is "mining". Mining generally refers to the act of digging up minerals like oil and gold. However, recently, when I hear about mining, I think many people think of Bitcoin (BTC) first. So why is Bitcoin (BTC), a collection of data that is not a mineral, called mining"? I will introduce the mechanism.
What is Bitcoin (BTC) mining?
What is crypto asset (virtual currency) mining?
Mining is performed in transactions of various crypto assets (virtual currency), but here we will explain using a typical crypto asset (virtual currency) "Bitcoin (BTC)" as an example. First, let's briefly explain Bitcoin (BTC) mining. Bitcoin (BTC) mining is the "work of approving transaction data", and the reward for the work is paid in the new Bitcoin (BTC). It is called "mining" because it is similar to mining a small amount of gold from a large amount of stones.
What is "work to approve a transaction"?
Bitcoin (BTC) is traded on a daily basis all over the world, and the amount of transactions is huge, such as billions of yen and tens of billions of yen. All of those transactions are managed by blockchain technology, giving people round the world peace of mind when trading Bitcoin (BTC). In other words, fiat currencies such as yen, dollar, and euro are managed by the central banks of each country, but Bitcoin (BTC) is "managed by blockchain technology", which is a general fiat currency. It is a very different form. Now it is being accepted and used widely around the world.
So how does blockchain technology manage Bitcoin (BTC) transactions?
In the blockchain, each transaction data of Bitcoin (BTC) is called a "transaction", and each transaction is put together to make one "block". Then, important information like "when", "who ,which address", and "how much Bitcoin (BTC) was traded" is written in the block, and a third party checks the transaction information and approves it.
In other words, this "work to approve a transaction" is basically mining.
What does Mining actually mean?
People who mine Bitcoin (BTC) are called "Miners" and there are many people all over the world and the number of miners are increasing day by day.In mining, the miner who approves the transfer transaction is paid. Bitcoin (BTC) has a fixed amount of compensation, and BTC is paid for each block.
In the case of Bitcoin (BTC), on average, remittance transactions performed during that period are checked and approved at once every 10 minutes, so if 1 BTC is 700,000 yen, it will be 8.75 million yen in 10 minutes. If 1 BTC is 1 million yen, you can receive a high reward of 12.5 million yen in 10 minutes. The rewards of Bitcoin (BTC) mining are so attractive that miners from everywhere the globe compete in mining.
How does mining really work?
Now that we've outlined Bitcoin (BTC) mining, let's take a more in-depth look at how it works.
The key to mining is to use your computer's computing power to find the numbers needed to generate new blocks faster than anyone else. Then, important transaction data like "when", "who" and "how much Bitcoin (BTC) was traded" is encrypted and written in the block so that it cannot be tampered with.
Can individuals participate in Bitcoin (BTC) mining?
You can participate in Bitcoin (BTC) mining with your own personal computer or smartphone, but it is quite difficult to receive rewards as there are large competing bodies around the world.
When Bitcoin (BTC) began to be issued, the number of miners was not so large, and the existence of mining was not widely known, so even if you participated in mining using your own computer at home, you were able to win some competition with other miners. However, due to the significant rise in Bitcoin (BTC) prices, miners around the world are now participating in Bitcoin (BTC) mining, and moreover, the latest computers are running in large numbers, so individuals participating in mining have now decreased winning rate. If you are going to start mining from now on, it seems that you have a higher chance of receiving rewards if you participate in mining of crypto assets (virtual currency) other than Bitcoin (BTC).
Mining method and features:
There are three methods of mining: solo (single) mining, pool mining, and cloud mining, each of which has different characteristics, advantages, and drawbacks . When starting mining from now on, it is important to understand each characteristic well and choose the method that suits you.
Solo (single) mining:
"Solo mining" is to arrange a computer by yourself and participate in mining by yourself. It seems that there are many cases where people that are aware of computers also participate as hobbies.
Pool mining:
While solo mining is done by one person, "pool mining" is a method in which multiple miners work together to mine. If the mining is successful, the reward are going to be received by the pool manager, then the reward are often distributed according to the workload of the participating miners.
Cloud mining:
It is a method to have a mining company (miner company) do mining. There are various forms of cloud mining, such as those that invest in a minor company and get a reward, and those that rent a mining machine and get a reward for success, and therefore the initial cost, commission, advantages and drawbacks differ depending on the contract. To avoid trouble, it is important to possess a decent understanding of your business scheme when starting cloud mining.