By Scott Hamilton
There has been a lot of talk in the financial news of late about Bitcoin and other cryptocurrencies. So I figured it would be a good time to write about Bitcoin and the process of getting them for free, with the right computer hardware of course. So first you might need a little background on cryptocurrencies, what they are, where they come from and why they began to exist.
Bitcoin was the first cryptocurrency and was born out of a need for the technical community to have a secure and traceable transaction ledger. The technology behind all cryptocurrencies is block chain. It is used to not only store all available coins, but also track the coins so they cannot be spent more than once by the same person. This makes cryptocurrency one of the most secure, and also the most traceable, form of currency.
Bitcoin mining is a method of searching blocks of random data for valid chunks of data that represent the coins, and then adding these coins into the central Bitcoin registry as owned by the miner. Individuals that mine for the coins cannot generate their own fake coins because all coins found must be verified by a “proof-of-work” function that confirms the individual was mining in the block of data containing the found coin.
Miners are paid transaction fees as well as a subsidy of the newly created coins. This allows anyone with a powerful enough computer to “mine” new coins and earn currency. The generation of Bitcoins was called mining because of the close resemblance to mining other commodities. It requires exertion and is slow to make new currency available at a rate similar to the rate that new gold is mined from the ground. The big difference is that the Bitcoin exertion comes in the form of solving complex mathematical equations.
The equation in particular is an SHA-256 hash generation algorithm. These hashes are randomly generated based on the random number generator in computer hardware. The valid Bitcoin blocks always start with a series of zeros, which greatly reduces the probability of getting a valid block. The valid hash algorithm is constantly changing so that the number of block, or coins, mined each week remains constant, every 2016 blocks that are found adjust the algorithm so that a block is found by a miner every 10 minutes. At the time of the writing of this article, a block is worth 25 bitcoins, and the value gets cut in half every 210,000 blocks that are found.
If you are interested in learning more about Bitcoin mining and how to get started, you can head over to http://www.bitcoinmining.com and check out the various options available to you. On the site they have links to specialized mining hardware; the fastest mining system they advertise today is capable of mining a block in about three months. Right now the power draw of these systems make mining only slightly profitable, but the cool part is, for around $400 you can start your mining operation, and at the current bitcoin value you can earn about $42,000 a year if you are lucky enough to find the right blocks. The more mining machines you have running, the higher the odds of finding blocks and the more profit you stand to make. However, it is important to note that the value of Bitcoin has been climbing steadily, with a $9,000 growth in value the first week of February alone. Until next week, stay safe and learn something new.