Key Steps to Understanding Bitcoin Mining: From Software to Consensus

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Key Steps to Understanding Bitcoin Mining: From Software to Consensus

Sat Jul 28, 2018 1:23 pm

Bitcoin mining is a lucrative, yet difficult venture that has become exceedingly popular with the emergence of various cryptocurrencies. Although Bitcoin is the largest and most valuable digital asset that can be mined, other cryptocurrencies require it as well such as Litecoin.

Unfortunately, while the general protocol of Bitcoin states that anyone is free to mine the cryptocurrency, the costs of power and the devices and software used, are high. The process is also extremely competitive. This is why there is a continuous evolution in Bitcoin mining hardware and software used for the process, to make it easier for miners to work. There are several popular devices associated with mining, such as ASICs and GPUs, but their software counterparts are often overlooked.

The main function of these software programs is to run the algorithms that help miners to solve the complex puzzles needed for mining. While several great ones exist, BFGMiner is one of the best and most popular mining software. To fully understand how BFGMiner works, it is essential to understand what Bitcoin mining is and how exactly it is done.

What is Bitcoin Mining?
Bitcoin mining is a mechanism used to confirm new Bitcoin transactions as well as introduce new BTC into the network through rewards that miners are paid. Through mining, certain groups of users are also incentivized to ensure the security of the system.

The technology that powers Bitcoin is known as blockchain, a decentralized ledger containing the records of all transactions on the Bitcoin network. As the name suggests, a blockchain is made up of a “chain of blocks” which serve as batches for the transactions entered into the ledger. To update this ledger, new blocks containing new transactions must be appended to the existing blockchain.

This process ensures that these transactions are confirmed, and pending payments go through. The idea behind this technology is to ensure a trustless, permissionless, transparent value system that is independent of central authorities. However, for a system to be truly trustless and transparent, its users need a way to verify that transactions have indeed occurred.

They also have to accurately account for the additions and deductions to the balances of the nodes on the network. To ensure this, consensus occurs on every single node, no matter how many there are. When every node has agreed on which version of the blockchain is accurate, that version is appended to the existing copy that each user has. ... consensus/

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