1- What is Bitcoin Mining? Why was it needed?
Unlike other fiat currencies that we frequently use in daily life, Bitcoin is not a monopoly of a single person or institution. Other currencies are minted by the central bank of the relevant country in mints according to some formality rules. Anyone who wants Bitcoin can produce it at home, at work, or even on a remote server thanks to cloud mining.
Why does the attachment bitcoin have a supply mechanism that everyone can produce in this way? For the answer to this question, we will need to touch on the concept of blockchain a bit.
The main element that created blockchain bitcoin. We can say that Blokchain is a decentralized security system that allows it to be processed safely without changing it. Here's a look at this configuration of bitcoin. How does Bitcoin work? It is useful to take a look at the subject.
An incentive system is needed to execute transactions on the Bitcoin network and to ensure new bitcoin production. People are going to set up their servers and secure the network by giving money to expensive devices (publicly included as a bitcoin machine), but why do they do it? Because every block they dig has a reward waiting for them.
Thanks to this incentive system, people from all over the world are mining, allowing both transactions to be confirmed in the bitcoin network and earning income by getting the rewards from the blocks they dig for doing this job.
How Jobs Work in Bitcoin Mining ?
Bitcoin mining formula?
The first answer to the question of how to generate Bitcoin is that, as we explained above, miners dig up and discover new blocks by solving encrypted math problems. We need powerful hardware to solve these challenging mathematical problems.
When we went back to the old days when bitcoin was just coming out, the processor of the computers we used in our home was enough for this job. Because the miner's density was low and the price of bitcoin was low, so the blocks were easier to dig for incentives, which meant more rewards were given to the miners.
Fortunately, Satoshi Nakamoto, the creator of the bitcoin, took a precaution for this too. As Bitcoin production intensity increases, the difficulty of mathematical problems we need to solve to dig blocks increases. As the production density decreased, the difficulty was decreasing to encourage people. Thus balance was achieved. You can learn the current bitcoin difficulty value from this link.
A bitcoin miner does 3 things while earning bitcoin;
1.New Bitcoin Supply
Bitcoin miners extract hot bitcoins that have never been used from the blocks they have mined by mining. Every 10 minutes, the block is dissolved and bitcoins are supplied by miners.
2. Confirming Bitcoin Transfers
As bitcoins from a person's bitcoin wallet enter the wallet of person B, the record of this is recorded in the blocks they have mined. Thus, these operations are irreversibly permanent and cannot be changed. Each block added on top of these blocks makes this process more immutable. Because in order to manipulate this process, it is necessary to manipulate all the blocks added later. You can find all these transaction records publicly in the block explorer.
3. Ensuring the Security of the Bitcoin Network
Miners do not allow a malicious miner or user to commit a fake transaction while confirming the transactions. The majority prevents the network and secures the network.
What is Required for Bitcoin Mining?
There are two sources of income in Bitcoin mining. One of these is the commissions paid by the transmitters when approving the transfers in the network. The other is block rewards from the excavated blocks.
In order to earn block rewards, which are the main source of this income, we need the processing power to solve the blocks. While even the processors of computers used to be enough, this is not possible today.