The Bitcoin phenomenon began in 2008. The idea was to create a digital currency and payment system not dependent on a central bank, but administered transparently without an intermediary.
The electronic currency is based on cryptographic evidence. Anyone who has an Internet connection and appropriate hardware can participate in it.
How do Bitcoins work?
As with conventional currencies, people transfer Bitcoins over the designated Bitcoin network every day. It operates as a peer-to-peer currency, since the Bitcoin only exists virtually, through a message to all participants stating that a certain amount is sent from one account to the other.
Each transaction is collected and aggregated into one large block. The list of all transactions is public but anonymous. It is located in a decentralized database administered by all participants.
This means that each user can verify that no Bitcoin is sent twice or faked.
What is behind it?
In order to cope with the enormous amount of data that arises during the transactions, all transactions of a certain period are grouped together in data blocks, which form a blockchain next to each other.
At the end of this blockchain is a certain checksum called a hash. This is composed of the transactions in the block, a part of the hash of the previous block, and other components. The hash ensures that the blocks can not be manipulated later.
Being able to calculate this hash is the real skill and incentive of Bitcoin Mining; there is even special software for it. Whoever has succeeded in finding a new block and first to calculate a valid hash, continues the blockchain and thus maintains the system of bitcoins. There is a reward of 12.50 bitcoins for each hash.
How to mine Bitcoins yourself
For every 210,000 blocks mined, the reward for a hash is cut in half. Bitcoin was designed to be a currency with no more than 21 million Bitcoins ever in circulation, so this halving ensures that all Bitcoins are not distributed too quickly. Therefore, it becomes increasingly difficult to calculate a hash, meaning more time and computing power is required. Due to this scarcity, the value of the Bitcoins increases steadily. Currently, a Bitcoin is worth over £2,100.
The high price and the prospect of further increase in value make Bitcoin Mining more popular than ever. In order to get in, you need powerful hardware and a Bitcoin client, which can be downloaded free of charge online.
Most computers are no longer suitable for Bitcoin Mining. In order to compete with the competition, you need a particularly powerful graphics card, such as models from GTX 1060 or Radeon 570. Bitcoin Miner can also be used with special hardware.
