The Bitcoin Blockchain Management
The Bitcoin ledger known as Bitcoin Blockchain is managed and maintained by several independent entities. It offers unmatched flexibility compared to centralized ledgers. As bitcoin is devoid of any single management authority, there has to be an agreement among users on a common ledger. New transactions are converted into lists called blocks and added to the Blockchain. Gradually, it creates a long list which covers every single transaction that is done in the bitcoin network.
It is important to ensure that the Bitcoin Blockchain is never tampered. This responsibility of taking care of Bitcoin Blockchain is of miners
The job of the miners is to confirm the creation of blocks and write them in a ledger. The block gets added to the public ledger which has all recorded transactions. All users can update their individual copies of the transaction ledger as the block is broadcast over the bitcoin network.
When the block creation is completed, the miners start solving cryptographic problems in order to add block to the Bitcoin Blockchain. A specific formula is applied to the information provided in the block that converts the data into a random series of letters and numbers called the cryptographic hash function. The hash associated with each block must deal with a specific restriction as provided in the formula.
How Bitcoins are earned?
To earn a bitcoin, miners must solve a specific block hash problem related to the Bitcoin protocol. When they solve the problem successfully, they get rewarded in two parts - a newly created bitcoin and fees from the transactions included into the block. In 2016, 25 new bitcoins were generated from each block while the transaction fees were about 0.5 bitcoin.
Miners do not verify every transaction but authenticate many of them at once. The transactions are secured within a box with a virtual lock. Software systems are deployed to locate the key for unlocking box. Once the box is opened, the transaction is confirmed following which the miner receives 12.5 bitcoins. This is easy to say; however difficult to do as the key is not easy to locate. The attempt average is a whopping 1.7 billion. Miners, who use the right tools in a right manner get rewarded
Bitcoin Mining Software
Acquiring all the equipment and software can push up the total cost of mining bitcoin. One of the most successful miners by the name of Eric says - he spent over $50,000 on CPUs, graphic cards, memory cards, circuit boards and memory. The cost of using water cooling technology and electricity can also escalate costs quickly.
Miners are now pooling together their funds and resources to reduce expenses and workloads, and to increase operational efficiency. The commonly used methods are:
- Pay-per-share: This software is at the core of successful crypto-currency mining and used for the ASIC miner except in some new models.
- Proportional: In this method, miners are allowed to earn shares until the pool finds a block. Thereafter, each user gets a fixed number of shares within the round that is calculated using a proven formula.
- Bitcoin Pooled Mining: Also known as the slush system, in this system older shares are given less preference as compared to recent shares. There is scarce chance of tricking the mining pool system by switching pools.