In the next few minutes of this article we will talk about Bitcoins and the process used to earn it - namely "Bitcoin mining. Okay, so what is Bitcoins? In the world there is a thing called cryptocurrency. Now what does this means? Well, cryptocurrency is just like normal currency with two main differences – it is completely digital and independent of any central authority. So no government regulated agency has direct intervention in this. Don’t worry, it is all legal!
Bitcoins are the first cryptocurrency which came into existence in year 2009 and since then the rush for using to become rich has gone exponential. As of year 2013, the total value of money supply in Bitcoins is 1.5 billion dollar and as of April 2013, the profits being made through a day’s worth of Bitcoin mining was around 680,000 USD.
These digital currencies work on a system of peer-to-peer network in which each transaction is marked by a unique signature from either side. You don’t get any coins or cash in hand if you are dealing completely in Bitcoins. These are in crude sense numbers on you digital wallet. To get the numbers you have to solve math problems – no not like in school, but one that requires heavy amount of computing.
Now Bitcoin mining is a process to earn Bitcoins. In a general sense, Bitcoins are not earned but discovered out. In an analogous fashion consider a currency coin embedded in an hard ice block. In order to get the coin, you have to first discover the block and then break the block piece by piece till you reach the coin. Now replace the coin currency by Bitcoin and the ice block by mathematical functions. These functions are to be solved or decoded in order to reach the coins. Now in technical terms it is a process of running SHA 256 double round hash verification process in order to secure and validate the transactions.
Then what’s the competing factor? Now, doing the above computations requires a good amount of hardware and electricity. In recent past, it was possible to do the bitcoin mining with your computer CPU or high speed video processor card. The scenario has changed and much faster systems have come to dominate the industry. So anything less than that will consume more electric energy than you will earn from it. The more computing power you can share, the greater will be your share in the reward. The entire Bitcoin network compensates the miners for their effort directly proportional to the computational power contributed.