What is Bitcoin mining and how is it done ?

M

MrEarl

Registered User
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Hello,

Can someone please explain to me in "simple English" what bitcoin mining is, how one goes about it, what they need and what they might expect to get back ?

Many thanks.
 
Bitcoin mining is where you use a computer to perform calculations in order to discover bitcoins.
 
https://www.youtube.com/watch?v=t4p4iMqmxbQ

You need quite a bit of technical / coding skills.
You need to import ASICs (small computers) from Asia, and compete with the people sourcing them locally. Although I hear more manufacturers are joining.
You also need to find cheap electricity, because you compete with subsidised electricity prices, prices in India, prices in rural China, people hooking up their miners on a water dam.

On top of that, compliance. Are you simply making income, paying income tax? Are you transmitting money, because you confirm blocks, needing money transmitter licence? Or are you printing money?
What if you get all those ASICs and in 5 months the EU says you are printing money?
 
This is a useful thread. The RTE article says:
"Bitcoins are created by a process known as mining, which involves people using powerful computers to solve complex mathematical problems to release the virtual currency."
Who sets the mathematical problem(s)?
Why does it take hordes of PCs linked up in 'farms' to solve the mathematical problem, when NASA sent men to the moon and back on the computing power of a calculator?
What is the significance of Prime numbers in the problems?
What actually happens when a miner finds or solves the problem and gets a Bitcoin?
who verifies that the miner has indeed found a BTC?
Is mining BTC beyond the capability of mere mortals without a farm of graphics processors?

TIA, really curious.
 
I've just added another lengthy post to that thread specifically about mining.
 
I appreciate the effort to explain this process. I kinda get it but couldn't explain it to anyone. Thanks.
 
Miners are voluntarily working to solve blocks. Blocks award 12.5 new bitcoins and whatever the fees of the transactions the miner includes in that block are, lets say 3 btc on average.
So miners are working to get 15.5 btc per 10 minutes. At current prices that is about 270k dollars. That's the maximum that can be profitably spent on mining per 10 minutes. If the price of bitcoin falls, this number will fall. The 12.5 award will halve to 6.25 in mid 2020, and continue to halve every 4 years.
 
This is the greatest nonsense known to mankind, Miners are simply solving massive sudoko puzzles with no added value whatsoever but simply set with a target to make the time to solve them 10 minutes. Stop this talk of mining. Nothing of value is found by the mining process. BTC are totally, totally worthless. If only I could call when the Satoshi will drop.
 
Last edited:
vandriver said:
Fact:more electricity is used bitcoin mining than the whole usage of Ireland.
Click to expand...

Loads of things use more electricity than Ireland.

ant dee said:
You need quite a bit of technical / coding skills.
Click to expand...

No you don't.

ant dee said:
On top of that, compliance. Are you simply making income, paying income tax? Are you transmitting money, because you confirm blocks, needing money transmitter licence? Or are you printing money?
What if you get all those ASICs and in 5 months the EU says you are printing money?
Click to expand...

You are not transmitting money and certainly not printing money and you don't need a money license. Assuming you are cashing out as you go you will pay income tax.

Slim said:
This is a useful thread. The RTE article says:
Why does it take hordes of PCs linked up in 'farms' to solve the mathematical problem, when NASA sent men to the moon and back on the computing power of a calculator?
Click to expand...

It doesn't, that's just to increase profit. You can set up one rig up solo in your house and at the current price you will turn a modest profit. The 'farms' are the same thing, but with 100's or 1000s of rigs and usually in a place with very favourable electricity rates.

Slim said:
who verifies that the miner has indeed found a BTC?
Click to expand...

They are not 'looking for' or 'discovering' bitcoins.

I think most answers here have missed the actual point of mining - they are confirming transactions, which is really the thing keeping the network going. It makes the ledger secure and prevents double spending and the like. This keeping of the ledger (a chain of 'blocks') is the core of the whole system. They are then rewarded for this activity in both transaction fees, and new bitcoin.

I'd post links but it won't allow me until I reach 10 posts. A few here could do with at least reading the whitepaper to get some clue as to what they're slating. Or at minimum, the bitcoinwiki.
 
It has been said before. Proof-of-work is important.
It is important because every kw/h spent on it ensures the immutability of the transactions.

I would much rather have an immutable ledger and not need it than need one and not have it.

Mining goes where power is cheap, so much of the power used would otherwise not be produced.

I am pretty sure we spend more power mining gold, smelting it, transporting it, storing it, transporting it, smelting it again etc and you cant really do that on the idle water dam on the remote Chinese province.
 
On the face of it Dukie it is hard to argue with you.
As a joe soaper with no technological nous I have, over the last 20yrs or so, been sceptical and dismissive of practically every technological advancement until it was in my face and then I have accepted it all. Including bitcoin, which I dismissed out of hand numerous times before I even thought of considering it.
So, I figured, perhaps I need to change my way of thinking and look at the things from the perspective of those who are advancing these technological advancements, ie - tech heads.

This is their era, their time, they are on the trajectory of engineering our societies from remote apps to manage home heating and security, to intricate heart surgergy and disease detection and eradication. To designing a multitude of better, more efficient things that we use everyday.
We are catapulting into the digital era, from the internet, to skype and FB, from wifi to nano technology, from driverless cars to - the elephant in the room - artifical intelligence.

If you believe that the digital era is upon us, if you believe in nano technology, quantum physics (without necessarily understanding any of it) then you have to accept that a digital currency is not only possible, but inevitable.

I read about the AI bot that became the best chess player ever in the space of four hours, equipped only with the rules of the game. This is distinct from previous 'super' computers that were armed with databases of thousands of games and positions - and still got beaten by Kasparov!

I have always been highly sceptical of the ability of Satoshi Nakamoto to remain anonymous all this time. Particularly as the original paper is written in the plural form, 'we'. If it is more than one, the probability of someone talking increases with each extra member of the group.

Alternatively, perhaps Satoshi is AI? Perhaps the bots have figured a calculation that replaces the fiat system, and, an algorithm that will eventually encroach into all our lives despite our scepticism?
 
Hi Breadkettle. I see you have edited a post of mine from Dec 5. The edit makes it misleading. In relation to the second quote if mine, l have learned much over the last few weeks, thanks to knowledgeable posters like yourself and fpalb, so l wouldn't phrase my question like that today.
 
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