Bitcoin was born as a medium for exchanging goods and services like any other currency. But what differs from Bitcoin is that it does not have an intermediary that records transactions. We call this pattern decentralized or distribution center While conventional currencies (Fiat Money) have an intermediary that records transactions. which here is the central bank or government, known as Centralized or centralized
A centralized system in which the intermediary records transactions is the delegation of absolute power to the intermediaries. This can lead to problems such as corruption. Satoshi Nakamoto therefore created Bitcoin as a digital currency with decentralized with very creative principles This means that people who want to record transactions compete for the right to add the next batch of transaction data to the Bitcoin network. Which we will explain to each other in the next section.
Meaning of Bitcoin Mining
The Bitcoin Network is a Blockchain that stores data. decentralized Every million computers on the network (called Node) around the world store all transaction data from the first to the last. And there is always a check that all machines are in sync. That's why only a few spoofing machines on the network can't do anything on the network.
Bitcoin mining comes into play when a new set of transactions takes place on the network. A new set of transactions will be announced to the network in the form of encryption. Machines that will be eligible to update their data on the Blockchain and be rewarded in bitcoin will have to compete with each other to 'guess' the numbers to complete the equation and Correct the code before other devices. We will call the computer that competes to guess this number 'Miner' (Miner).
Guessing the numbers here is mining, which uses the computing power of a computer to guess millions of numbers in a fraction of a second. The number of numbers a computer can guess depends on the processing power or hashrate of each machine. This means that computers with high computing power will have a better chance of guessing numbers before others.
Such a system is called Proof-of-Work or proof by exertion So that the network can come to an agreement that the miners have worked through the processing. Therefore, it has the right to add a new set of data to the Blockchain. Because it will add new bitcoins to the network just like gold mining will bring new gold into the market.
Evolution of Bitcoin Mining
in order to maintain the balance of the number of new bitcoins that will be added to the system Nakamoto thus built a Bitcoin network by embedding a set of instructions that the network would adjust the 'hardness' of the encryption to match the overall computing power of the entire network. That means the more miners there are. The higher the difficulty of mining, the higher it will be.
When Bitcoin first came into existence in 2008, there were still very few miners. The difficulty of mining is therefore not very high. Miners can easily use their laptop's CPU to mine bitcoins.
Later, with more miners added. As the competition grows, GPUs, which are computer graphics processing units, are being used to mine bitcoins, as GPUs can do tens of times more hashrate than CPUs, which is why from 2011 onwards we might be seeing GPU news. Missing the market for some time
conclude
Bitcoin mining is about 'guessing' a series of numbers in order to solve mathematical equations before other miners in the network. If you guessed correctly first, you have the right to add a new set of transaction data to the network. And get rewarded with new bitcoins that are not yet in the system.
The processing power of a computer affects mining quite a lot. The higher the processing power, the more numbers can be guessed in the same amount of time. So the chances of guessing correctly are higher. Therefore, there is a competition within the network.
However, neither the CPU nor the GPU were originally built to mine bitcoins. Therefore, the invention of mining equipment, ASIC, which stands for Application-specific Integrated Circuit, has been developed, which is popular with the big miners. And it has become a new standard for bitcoin mining.
For small miners who want to mine bitcoins But no investment to buy specialized equipment They can join a Mining Pool, which is a group of small miners to bring together their computing power to compete with the big ones. But the mining reward is divided by the number of miners.
Or even easier is to use a trading board that is regulated by the Securities and Exchange Commission of Thailand such as Bitkub.