Now everyone can mine bitcoin

Now everyone can mine bitcoin

Understanding Bitcoin

The bitcoin system is a collection of computers (also referred to as "nodes" or "miners") that all run bitcoin's code and store its blockchain. Metaphorically, a blockchain can be thought of as a collection of blocks. In each block is a collection of transactions. Because all the computers running the blockchain have the same list of blocks and transactions, and can transparently see these new blocks being filled with new bitcoin transactions, no one can cheat the system.

Anyone—whether they run a bitcoin "node" or not—can see these transactions occurring in real-time. To achieve a nefarious act, a bad actor would need to operate 51% of the computing power that makes up bitcoin. Bitcoin has around 10,000 nodes, as of June 2021, and this number is growing, making such an attack quite unlikely.2

But if an attack were to happen, bitcoin miners—the people who take part in the bitcoin network with their computers—would likely fork to a new blockchain, making the effort the bad actor put forth to achieve the attack a waste.

Balances of bitcoin tokens are kept using public and private "keys," which are long strings of numbers and letters linked through the mathematical encryption algorithm that was used to create them. The public key (comparable to a bank account number) serves as the address published to the world and to which others may send bitcoin.

The private key (comparable to an ATM PIN) is meant to be a guarded secret and only used to authorize bitcoin transmissions. Bitcoin keys should not be confused with a bitcoin wallet, which is a physical or digital device that facilitates the trading of bitcoin and allows users to track ownership of coins. The term "wallet" is a bit misleading, as bitcoin's decentralized nature means it is never stored "in" a wallet, but rather decentrally on a blockchain.

Peer-to-Peer Technology

Bitcoin is one of the first digital currencies to use peer-to-peer technology to facilitate instant payments. The independent individuals and companies who own the governing computing power and participate in the bitcoin network—bitcoin "miners"—are in charge of processing the transactions on the blockchain and are motivated by rewards (the release of new bitcoin) and transaction fees paid in bitcoin.

These miners can be thought of as the decentralized authority enforcing the credibility of the bitcoin network. New bitcoin are released to the miners at a fixed, but periodically declining rate. There are only 21 million bitcoin that can be mined in total. As of June 2021, there are over 18 million bitcoin in existence and less than 3 million bitcoin left to be mined.3

In this way, bitcoin and other cryptocurrencies operate differently from fiat currency; in centralized banking systems, the currency is released at a rate matching the growth in goods; this system is intended to maintain price stability. A decentralized system, like bitcoin, sets the release rate ahead of time and according to an algorithm.

Bitcoin Mining

Bitcoin mining is the process by which bitcoin is released into circulation. Generally, mining requires solving computationally difficult puzzles to discover a new block, which is added to the blockchain.

Bitcoin mining adds and verifies transaction records across the network. Miners are rewarded with some bitcoin; the reward is halved every 210,000 blocks. The block reward was 50 new bitcoins in 2009. On May 11th, 2020, the third halving occurred, bringing the reward for each block discovery down to 6.25 bitcoins.4

A variety of hardware can be used to mine bitcoin. However, some yield higher rewards than others. Certain computer chips, called Application-Specific Integrated Circuits (ASIC), and more advanced processing units, like Graphic Processing Units (GPUs), can achieve more rewards. These elaborate mining processors are known as "mining rigs."

One bitcoin is divisible to eight decimal places (100 millionths of one bitcoin), and this smallest unit is referred to as a Satoshi.5 If necessary, and if the participating miners accept the change, bitcoin could eventually be made divisible to even more decimal places.

History of Bitcoin

Aug. 18, 2008

The domain name bitcoin.org is registered. Today, at least, this domain is "WhoisGuard Protected," meaning the identity of the person who registered it is not public information.

Oct. 31, 2008

A person or group using the name Satoshi Nakamoto makes an announcement to the Cryptography Mailing list at metzdowd.com: "I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party. This now-famous whitepaper published on bitcoin.org, entitled "Bitcoin: A Peer-to-Peer Electronic Cash System," would become the Magna Carta for how bitcoin operates today.

Jan. 3, 2009

The first bitcoin block is mined—Block 0. This is also known as the "genesis block" and contains the text: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks," perhaps as proof that the block was mined on or after that date, and perhaps also as relevant political commentary.6

Jan. 8, 2009

The first version of the bitcoin software is announced to the Cryptography Mailing list.

Jan. 9, 2009

Block 1 is mined, and bitcoin mining commences in earnest.

Who Is Satoshi Nakamoto?

No one knows who invented bitcoin, or at least not conclusively. Satoshi Nakamoto is the name associated with the person or group of people who released the original bitcoin whitepaper in 2008 and worked on the original bitcoin software that was released in 2009. In the years since that time, many individuals have either claimed to be or have been suggested as the real-life people behind the pseudonym, but as of June 2021, the true identity (or identities) behind Satoshi remains obscured.7

Although it is tempting to believe the media's spin that Satoshi Nakamoto is a solitary, quixotic genius who created bitcoin out of thin air, such innovations do not typically happen in a vacuum. All major scientific discoveries, no matter how original-seeming, were built on previously existing research.

There are precursors to bitcoin: Adam Back’s Hashcash, invented in 1997, and subsequently Wei Dai’s b-money, Nick Szabo’s bit gold, and Hal Finney’s Reusable Proof of Work.8 The bitcoin whitepaper itself cites Hashcash and b-money, as well as various other works spanning several research fields. Perhaps unsurprisingly, many of the individuals behind the other projects named above have been speculated to have also had a part in creating bitcoin.

There are a few possible motivations for bitcoin's inventor deciding to keep their identity secret. One is privacy: As bitcoin has gained in popularity—becoming something of a worldwide phenomenon—Satoshi Nakamoto would likely garner a lot of attention from the media and from governments.

Another reason could be the potential for bitcoin to cause a major disruption in the current banking and monetary systems. If bitcoin were to gain mass adoption, the system could surpass nations' sovereign fiat currencies. This threat to existing currency could motivate governments to want to take legal action against bitcoin's creator.

The other reason is safety. Looking at 2009 alone, 32,489 blocks were mined; at the reward rate of 50 bitcoin per block, the total payout in 2009 was 1,624,500 bitcoin. One may conclude that only Satoshi and perhaps a few other people were mining through 2009 and that they possess a majority of that stash of bitcoin.

Someone in possession of that much bitcoin could become a target of criminals, especially since bitcoin is less like stocks and more like cash, where the private keys needed to authorize spending could be printed out and literally kept under a mattress. While it's likely the inventor of bitcoin would take precautions to make any extortion-induced transfers traceable, remaining anonymous is a good way for Satoshi to limit exposure.

Special Considerations

Bitcoin as a Form of Payment

Bitcoin can be accepted as a means of payment for products sold or services provided. Brick-and-mortar stores can display a sign saying “Bitcoin Accepted Here”; the transactions can be handled with the requisite hardware terminal or wallet address through QR codes and touch screen apps. An online business can easily accept bitcoin by adding this payment option to its other online payment options: credit cards, PayPal, etc.

El Salvador became the first country to officially adopt Bitcoin as legal tender in June 2021.9

Bitcoin Employment Opportunities

Those who are self-employed can get paid for a job related to bitcoin. There are several ways to achieve this, such as creating any internet service and adding your bitcoin wallet address to the site as a form of payment. There are also several websites and job boards that are dedicated to digital currencies:

  • user

    admin

    Thanks for sharing.

    1 year ago