What is Cryptocurrency and Bitcoin Mining

 What is Cryptocurrency and Bitcoin Mining

 “Cryptocurrency Mining”, is an overview post about “difficult”, in simple words!

“Mining”, we will describe quite simply, in our opinion, the principles of what, from a technical point of view, looks quite complicated for beginners, but we are sure that this material will really be useful to users.

So, “Mining” (mining) from English should be understood as “extraction” or “extraction” of anything valuable, for example, in gold mines, but the “miners” in question are extracting a new kind of gold, known as - "cryptocurrency".

"Bitcoin", "Litecoin", "Namecoin", "Ppcoin", "Ethereum" and more than seven hundred different "crypto brands", at a variety of rates in real currency!

The sharp popularity of the “cryptocurrency” phenomenon, in particular, “Bitcoin”, despite the fact that the technology has been officially known since 1983 (the authors David Chaum and Stefan Brands announced the world’s first “electronic cash protocols”), as the phenomenon began to massively gain momentum with Media reports about the middle of 2016, when the value of the dollar equivalent began to increase at a galloping pace, and in the middle of 2017 reached the X4.5 mark, amounting to more than $ 3,500.

According to the global service "SEMrush", and according to Google, during this period, users requested Bitcoin more than 51 million times. On 09/20/2017, the price for one "bitcoin" was 3.719 $ on sale, and it all started with a figure of more than a hundred "bitcoins" for 1 $!

What is a "cryptocurrency", in a specific example with "Bitcoin"?

Formally showed up in 2009, the creation is credited to a software engineer or an entire gathering of designers under the pseudonym Satoshi Nakamoto. Its feature is complete decentralization and the absence of a single “bitcoin bank”, which ensures their safety, due to the almost complete impossibility of forgery, including, among the advantages, the inability to track transactions.

“Bitcoin” is essentially a cryptographic code, an encrypted, non-forgeable set of characters, and if we talk about the cryptocurrency market as a whole, then it is completely unique since each of them does not depend on the other, like Bitcoin itself, in principle, does not depends, for example, on the US dollar.

The popularity of “Bitcoin” lies in the number of real people on the network trying to buy or “mine” it, and the higher this popularity, the higher the cost increases. At the same time, in the process of “mining”, not everyone gets it, because once, a much smaller number of people were involved in the “cryptocurrency” system, and, accordingly, a smaller number of “miners” got more “bitcoins”.  The more "diggers" were remembered for the "mining", the more individuals started to get them, just in more modest numbers.

Feeling this hype, more and more "online investors" hastened to learn the principles of "cryptocurrency mining" straight from the Internet. After all, the more home-made servers you have with powerful video cards and other “stray”, for example, in a rented hangar, swimming pool, or your own basement, the higher your chances of “mining bitcoin”. First, you need to download the wallet and synchronize it, then download the “miner” if it does not go with the application in the “wallet”. PCs freely do different computations until one of them "gets" a code from the computerized space "Bitcoin".

To organize an effective "mining farm", according to conservative estimates, you need about $ 5 thousand, while analysts predict the first profit in terms of 5-6 months, so it is not uncommon for "miners" to join coalitions and "pools" (about we’ll talk about them later) so that “mining” pays for itself faster and in large volumes. At the same time, the “hardware” of the computer works, as they say, for wear and tear, consumes the maximum number of kilowatt-long stretches of power, and the actual cycle is exceptionally sluggish, and this is notwithstanding the accompanying "highlights".

Let's start with the fact that the rate of "Bitcoin" is extremely unstable, it cyclically changes its real exchange value, since there is a scale of the dollar currency market and therefore the players of the "cryptocurrency exchange" themselves significantly influence the rate and positions of the "cryptocurrency", and the more these real money players, the greater their direct influence, through the tools of the exchange game.

The largest of the players, the so-called "pumpers" are wealthy people who manage assets of tens of millions of dollars, and it is entirely in their power to raise the rate of "cryptocurrency" to cloudy heights, and just as quickly land it.

There is an opinion that “Pampers”, as a rule, are the iron manufacturers themselves, precisely in order to stir up the hype in the market and stimulate serious sales. They constantly play with “cryptocurrency” quotes, raising or lowering rates, while inexperienced stock traders are trying to find positive dynamics and predict something for sure, losing precious time, it is also money, not understanding what is really happening in the heads of financial bigwigs are gradually squandering the small profits from buying and reselling "Bitcoin". At the same time, "pampers" skim off all the cream, because they have a huge speculative resource on their side, multiplied by experience in business, and therefore, it is reasonable not to rush to give away the last money and build a “mining farm” right at the place of residence, since there were no free bonuses in this craft in practice.

“Cloud mining”, in its unorganized mass, resembles chaos, and for a real understanding of what is happening, what is tied to what, and, in order to get real profit, you will have to objectively “get confused”. As a cloud mining service, it is provided on special equipment, the so-called ASICs. But let us recall that your start-up capital is at stake, and the budget, which includes the cost of computer hardware and the considerable cost of electricity in general, then the importance should be emphasized - practical knowledge about the nature of money itself and about the wide possibilities of computer technology. And if you wisely decide to enlist the support of specialists, when building a “mining farm”, consider their royalties, as specialists are simply necessary for beginners for a successful “startup”. Recall a simple algorithm “The more participants in the “cryptocurrency” market, the more expensive and inaccessible the “cryptocurrency”, and as it should be understood in this case, successful growth implies constant investment in expanding “farm” capacities for profitable “mining”.

Let's say you decide to dig even deeper, and then some key concepts will certainly come in handy, namely:

"Mining data center" - in fact, this is the same "farm" whose task is to "mine cryptocurrencies", and technically it differs from the standard "data center". With the help of its capacities, the “farm” extracts certain “blocks” (permanently recorded files in the Bitcoin network containing financial information about internal transactions) for the number of which, a reward in the form of “altcoins” is gradually awarded. In the traditional version of the "data center of mining," these are cascades of powerful video cards connected to one or more PCs. With the increase in the number of video cards, reinforced power supplies with efficient cooling are needed. Externally, the design looks like a server rack, on the basis of which all components are mounted (power supplies in such cases must be purchased separately since each of the video cards is capable of consuming more than 300 watts per hour. In turn, usually, the design is connected via a PC to the previously mentioned “pool”.

The “mining pool” is a server that distributes the task among all participants, and as soon as one of them manages to form an array of data into a “block” familiar to us, the participants of the “pool” receive their reward. Recall that “mining” completely alone promises inevitable costs for expensive equipment, and the more participants in the “pool”, the higher its speed and performance. Moreover, with the help of a "mining pool", participants are able to generate not only "Bitcoin", but also other existing "cryptocurrencies".

VPS (virtual private server) “server for mining”, this solution helps to avoid difficulties in working with “cryptocurrencies”, and in fact, it is a “cloud service”, namely, the collective use of computing power of remote “data centers”. Renting computing power helps you not be tied to a physical or virtual computer, and in fact, this is the most popular method of "cloud mining". The effectiveness of this type of "mining", however, from an economic point of view, is significantly inferior to "mining", directly on physical media.

 What is Cryptocurrency and Bitcoin Mining