Bitcoin mining: Can I make money doing it? Bitcoin mining is an interesting way of trying to make a few bitcoin tokens on the side, but it also serves a very important purpose in maintaining and keeping the bitcoin blockchain secure. In this guide we’ll look at how mining works, why it’s a necessary component of bitcoin infrastructure and whether it’s a good way of making a buck. Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade.
Performance is unpredictable and past performance is no guarantee of future performance. Whenever a transaction is made in bitcoin, a record of it is made on a block containing other recent transactions, like a page in a ledger. Once the block is full, bitcoin miners compete against each other to verify and validate the block and all its transactions by solving a complex cryptographic problem. The first miner to accomplish this is awarded a set amount of bitcoin, based on the mining difficulty at the time.
The verified block is then added to the blockchain, a history of all blocks verified since the beginning of bitcoin, and transmitted to all users of bitcoin so that they can have the latest blockchain. For a more detailed explanation of the blockchain, check out our guide here. The goal is to ensure that the process of adding a new block to the blockchain requires a lot of work. Basics of cryptographySHA-256, the mining algorithm used by bitcoin, is a one-way cryptographic algorithm. With this information, we can now start piecing together the mining process.
In reality, the block would contain a list of recent, unverified transactions, but let’s keep it simple. In order for the block to be solved, bitcoin uses a deceptively simple test: If the HASH result of the block starts with a certain number of zeros, the block is considered verified. HASH, and it doesn’t start with two zeros. If it doesn’t start with two zeros, we change the number and try again, and because changing one small number changes the whole HASH result, there is no way to predict the number we’ll need to solve this! HASH that starts with two zeros.