X11 Cryptocurrency for Dummies

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Instead, they went with Solution 2. The resulting currency, called bitcoin money, increased the blocksize to 8 Mb in order to accelerate the verification procedure to allow a performance of around 2 million transactions every day. In the time of writing, Bitcoin Cash is valued at $545.00 to Bitcoins $6,328.11.

When you hear bitcoin mining, you envisage coins being dug from the ground. But bitcoin isnt physical, so why do we call it mining

Since its like gold mining in the bitcoins exist in the protocols design (just as the gold exists underground), but they havent been brought out into the mild yet (just as the golden hasnt yet been dug up). The bitcoin protocol stipulates that 21 million bitcoins will exist at some point.

They get to do so as a reward for creating cubes of confirmed transactions and including them in the blockchain.

Backtracking a bit, lets talk about nodes. A node is a powerful computer which runs the bitcoin applications and helps to keep bitcoin running by participating in the relay of information. Anyone can run a node, you just download the bitcoin software (free) and also leave a certain port open (the drawback is that it consumes energy and storage space the network at time of writing takes up about 145GB).

One node will send information to some nodes that it knows, that will relay the information to nodes that they know, etc.. That way it ends up getting around the whole network fairly fast. .

Some nodes are mining nodes (usually referred to as miners). These group outstanding transactions into blocks and add them to the blockchain. How do they do this By solving a complex mathematical puzzle that's part of this bitcoin app, and including the answer in the cube. The puzzle that needs solving is to find a number which, when combined with all the information in the cube and passed through a hash function, produces a result that's within a certain range.

 

 

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(For trivia lovers, this number is called a nonce, which is a concatenation of number employed once. In the case of bitcoin, the nonce is an integer between 0 and 4,294,967,296.)

How do they find this number By guessing at random. The hash function which makes it impossible to forecast exactly what the output will be. So, miners guess the puzzle number and apply the hash function to the combination of the guessed number and also the data in the block. The resulting hash must begin with a pre-established number of zeroes.

Whats more, there might be several nonces that make the desired result, or there might be none (in which case the miners keep trying, but with a different block configuration). .

The first miner to acquire a resulting hash within the desirable range announces its success to the remainder of the network. The rest of the miners immediately stop work on that block and begin trying to find out the mystery number for your next one. As a reward for the work, the victorious miner gets some new bitcoin. .

At the time of writing, the payoff is 12.5 bitcoins, which at time of writing is worth nearly $200,000.

 

 

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Although its not nearly as cushy a deal as it sounds. There are a lot of mining nodes competing for that reward, and it is a question of fortune and computing power (the further guessing calculations more info here you can execute, the luckier you're ).

Additionally, the expenses of being a mining node are considerable, not only because of the powerful hardware needed (if you have a faster processor than your competitors, you have a better chance of finding the right number before they perform ), but also due to the large amounts of electricity that running these processors consumes. .

And, the number of bitcoins given as a reward for solving the mystery will decrease. Its 12.5 now, but it pits each four years or so (the next one is anticipated in 2020-21). The value of bitcoin relative to cost of electricity and hardware could extend up during the next few decades to partly compensate this reduction, but its not certain. .

The difficulty of the calculation (the necessary number of zeroes at the beginning of the hash string) is adjusted frequently, so that it requires on average approximately 10 minutes to process a block.

Why 10 minutes That is the amount of time the bitcoin programmers think is necessary for a continuous and diminishing flow of new coins until the maximum number of 21 million has been reached (expected some time in 2140).

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