How Bitcoins Are Made for Dummies

Let us say you had one legit $20 and one quite good photocopy of that same $20. If someone were to attempt to spend both the true bill and the imitation one, someone who took the trouble of looking at either of the bills' serial numbers would observe that they had been exactly the same number, and thus one of them needed to be fictitious.

This isn't a great analogy--we'll explain in more detail below. .

Once a miner has verified 1 MB (megabyte) worth of Bitcoin transactions, they are entitled to win the 12.5 BTC. The 1 MB limit was set by Satoshi Nakamoto, and is a matter of controversy, as some miners think the block size should be increased to accommodate more information.

Note that I stated that verifying 1 MB value of transactions makes a miner eligible to earn Bitcoin--not everyone who supports transactions will receive paid off.

1MB of transactions can technically be small as 1 transaction (although this is not at all common) or a few thousand. It depends on how much information the transactions take up.

In order to earn Bitcoin, you need to meet two conditions. One is a matter of effort, one is a matter of luck.

2) You have to be the first miner to reach the perfect answer to some numeric issue. This practice is also known as a proof of work.

The fantastic news: No advanced math or computation is involved. You may have discovered that miners are solving challenging mathematical problems--that's not true at all. What they are doing is trying to be the first miner to think of a 64-digit hexadecimal number (a"hash")  that is less than or equivalent to the target hash.

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The bad news: Since it's guesswork, you need a good deal of computing power in order to get there . To mine successfully, you need to have a higher"hash speed," which is measured in terms of megahashes per second (MH/s), gigahashes per second (GH/s), and terahashes per second (TH/s).

If you want to estimate how much Bitcoin you can mine along with your mining rig's hash rate, the website Cryptocompare provides a helpful calculator.

Either way a GPU (graphics processing helpful site unit) miner or an application-specific integrated circuit (ASIC) miner. These can run from $500 into the tens of thousands.  Some miners--particularly Ethereum miners--buy individual graphics cards (GPUs) as a low-cost method to cobble together mining operations.  The photo below is a makeshift, high-tech mining machine.  The graphics cards are those rectangular blocks with whirring circles.  Note the sandwich twist-ties holding the graphics cards into the metal rod.

Case in point I tell three friends I'm thinking about a number between 1 and 100, and I write that number on a sheet of paper and seal it in an envelope. My friends don't have to guess the exact number, they just must be the first person to figure any number that is less than or equal to the number I am thinking of.

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Let us say I'm thinking of the number 19. If Friend A guesses 21they lose because 21>19. If Friend B guesses 16 and Friend C guesses 12, then they've both theoretically arrived at viable answers, because 16<19 and 12<19. There's no"extra credit" for Friend B, even though B's answer was nearer to the goal answer of 19. .

In Bitcoin terms, simultaneous answers occur frequently, but in the end of the day there can only be one winning answer. When multiple simultaneous answers are presented which can be equivalent to or less than the target number, the Bitcoin network will decide by a simple majority--51%--which miner to honour. Normally, it is the miner that has done the most work, i.e.

The losing block then becomes an"orphan block" .

Now imagine I pose the"guess what number I'm thinking of" question, however I am not asking only three friends, and I'm not thinking of a number between 1 and 100. Instead, I am asking millions of prospective miners and I am thinking of a 64-digit hexadecimal number. Now you see that it's going to be extremely hard to guess the right answer.

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The number above has 64 digits. Easy enough to understand up to now. As you probably noticed, that number consists not only of numbers, but also letters of the alphabet. my review here Why is that

In order to understand these letters are doing in the middle of numbers, let's unpack the word"hexadecimal."

As you knowwe utilize the"decimal" system, which means it is base 10. This in turn means that each and every digit has 10 possibilities, 0-9.