Friends, strangers, colleagues and customers all ask me this more often; “Bitcoin Mining – What is It?” sometimes it I am tempted to say; “It is online gold mining“. Answering them with that simple statement is going to be like me opening a High School exam booklet for the first time…. Lots of question!
Even though it simply mean mining gold online but I have to break it down to a level where even my neighbor’s 3 year old can understand.
First of all “What is Bitcoin?“
Bitcoin is a cryptocurrency
A cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Cryptocurrency operates independently and is therefore not issued by any bank.
Bitcoin is one of the cryptocurrencies and the most expensive one I know of. Currently as I am writing this article, 1Bitcoin is equivalent to $6,388.01 even thou Bitcoin exchange rate changes from time to time, it is still the most expensive Cryptocurrency I know of.
Bitcoin was invented by an unidentified programmer or group of programmers under the name Satoshi Nakamoto. The program was introduced on 31st October, 2008 through a mailing list and was released as open source software in 2009. As at now, the identity of the creator(Satoshi Nakamoto) of the Bitcoin software has not been confirmed. The Bitcoin transaction occurs between two users without any administrator. Bitcoin by far, is the most secured online payment method.
Is Bitcoin Legal?
How is Bitcoin generated and what is Bitcoin mining?
As at how Bitcoin is generated from the source code, I can’t tell because it is very complicated but when you ask how it is generated by users, I can throw some lights on that one.
Just like mining Gold in real life, Bitcoin is mined through networks. Bitcoin mining companies called ‘Mining Pools’ have specialized hardware devices that calculate the Bitcoin codes and generate the Bitcoin units. Users who also want to earn Bitcoin, join the mining pool. Then the pool share tasks for them depending on the speed and type of computer device they join the pool with. The pool then rewards them with some of the Bitcoin that was generated. Some mining pools will just let you view adverts and you get rewards for that.
The speed at which a device mines Bitcoin is measured in Hash rate. So you could have KH/ps(KiloHash Per Second), MH/ps(MegaHashes Per Second) or GH/ps(GigaHashes Per Second).
The Bitcoin unit comes in digits with 8 decimal places. eg; 1.00000000= 1Bitcoin.
Each unit of the Bitcoin is known as a Satoshi. Eg; 0.00000001 = 1Satoshi.
While every single Satoshi counts, there is a minimum limit to how many Satoshi you can spend. While I can’t tell the limit, there is a limit to how much you must have in your bitcoin wallet before you start spending.
The next time you want to ask; “Bitcoin Mining – What is it?” just remember that you are trying to know what Gold is and how to mine some.