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We hate spam, unsubscribe with one click anytime You are at: This is unlike fiat currency which can only be printed by the government. This makes Bitcoin somewhat similar to gold and other precious metals, since they can only be mined, not printed on demand. Bitcoin mining is far different than extracting resources out of the Earth however.
Instead it involves your computer solving complex equations. The equations solved during Bitcoin mining are cryptographic hashing functionswhich are usually referred to as hashes. Why is Bitcoin Mining Important? Mining is important because it confirms transactions and secures the blockchain.
Bitcoin is Secure
Without mining Bitcoin transactions would never be confirmed and Bitcoin would become unusable. There is on average a new Bitcoin block every 10 minutes, but this can vary wildly from a few seconds between blocks to several hours.
When mining your computer turns all of the data from the most recent block of transactions into a hash, which is far shorter than the original transaction data and is comprised of a complex series of letters and numbers. It would be relatively easy to solve Bitcoin hashes if turning a list of transactions into a hash was the only requirement, but Bitcoin protocol makes this more difficult through requiring a string of zeroes in the hash. Everytime the computer gets a wrongly formatted hash the nonce variable is changed and the computer tries again.
In general it takes billions of iterations in order to find the correct Bitcoin block hash. Changing even 1 letter in the transaction data leads to a completely different hash, so as more transactions are added to a block the correct hash is constantly changing. Eventually the computer will find the correct hash, and this is called finding a block. Once the correct hash is found the block can be added to the blockchain and all transactions in that block are confirmed.
Clearly Bitcoin mining can be quite lucrative, and indeed many hundreds of millions of dollars have been invested into Bitcoin mining.
There are many types of Bitcoin mining hardware. It is possible to mine Bitcoin on any computer using the central processing unit CPU. The solution to this is joining a mining pool, which is a network of miners that combine their mining power in order to find blocks. The biggest Bitcoin mining pools are Ghash. The cost of electricity far exceeds 1 cent per day when mining Bitcoin with a GPU. Currently the only way to profitably mine Bitcoin is to use an application-specific integrated circuit ASICwhich is a machine built specifically for mining Bitcoin.