Nowadays, people are familiar with the power of bitcoin, but very few possess
knowledge on bitcoin mining. Essentially, it is commanding a computer to
perform mathematical calculations to confirm bitcoin transactions and
collecting newly-created bitcoin in the process.
But, it can often be difficult to decipher the ins and outs of how to do it
successfully. There are a plethora of common terms that you need to know if
you want to make mining a lucrative venture. Here's a list of important terms
to get you started.
Block
As a miner, you’ll be able to add and confirm a record of pending transactions
to a continuous line of other records. Those records are knowns as blocks, and
the line that you’ll be adding to is known as the blockchain.
Hash Rate
The amount of solutions your computer can discover through its mathematical
calculations depends on its overall power. Hash rate is the measure of that
hardware power, and the higher it is, the more chance you have of acquiring
rewards. Kilohash is the lowest (thousands), whereas petahash is the highest
(quadrillions).
Proof of Work Hashing
In order to receive your rewards, you’re going to have to prove what you’ve
done. To do this, miners will need to attach a hash to a block, and if they do,
they’ll demonstrate that they’ve added a new block to the blockchain.
Block Reward
Like we’ve already touched on, if you contribute to the bitcoin blockchain,
you’ll be rewarded for it. It started off with 50 newly-created bitcoins, but
since then, it’s decreased to 12.5. Now, it will continue to halve every four
years, or every 210,000 blocks, until 21 million bitcoins have been established.
Exchange Rate
The art of mining is to generate a healthy profit. But, to calculate profitability,
you’re going to need to know the price of bitcoin. This is known as the BTC /
XBT exchange rate, and it will certainly come in handy.
W/xHash/s
Mining is all about the quality of your computer hardware, but demanding so
much from hardware also claims electricity. So, to ensure you remain
profitable, you’ll need to work out the watts per hash rate per second.
Mining Pool
There’s a common adage ‘Many hands make light work.’ That also applies to
bitcoin mining, as solving a block individually is extremely difficult. But, if you
collaborate with other miners in a mining pool, you’ll have a much greater
chance of success. Rewards are distributed based on the hash rate each miner
contributes.
Difficulty
Bitcoin endeavors to make sure blocks are discovered approximately every 10
minutes. Although, with hash rates constantly on the rise, blocks could be
found much quicker. So, to prevent that, bitcoin developed a difficulty
measure, which directly correlates with the overall hash rate. This difficulty
measure updates every two weeks or every 2016 blocks.