2.2 'Bitcoin Mining' : "Who are the Miners?"

               

In the last episode Alice went to the ‚Bitcoin-Park‘ (Bitcoin-Network) and participated in a mathematical-contest (Mining) in order to win some Bitcoins. In this post I want to start to take a closer look into the mathematical contest. So Alice joined the „mathematical contest“ as a miner and won a reward. As I mentioned before, it is for free to join the competition. You would think here, „then why isn’t everybody joining…there is nothing to loose?!“ Well, indeed it is for free to join the contest, but the mathematical-tasks are so complex that you need some extra help, otherwise it would be basically impossible to solve the equation. With ‚extra help‘ I mean computers! So as a miner you bring your computers with you, that are calculating the solution for the mathematical-task. In the last post, I mentioned that „…Alice is really good at maths“. What I actually meant by that is that she has really good computers, which she brought to the competition for calculating the solution. The more computers you have and the better they are, the higher are your chances to solve an equation as first and get the reward. Actually Alice brought fast computers to the competition.  

But fast computers cost also a lot of money. Furthermore computers need electricity in order to run. Alice has to pay for the computers and the electricity-bill as well. 

                                                       

So to answer the question, „Why does not everybody join the free mathematical-competition for a reward?“ is: Because for the great majority of average single Bitcoin-Users (like you and me) it does not make an economic sense to join the competition. The costs for fast computers and electricity that you need to buy in order to have a real chance winning at least one contest, are probably higher than the reward you might eventually get. In the real world this is also quite the case. Most of the miners are actually big companies, which specialize on only running a lot of computers and let them calculate the mathematical equation during the contest. 

                                                 

 So in the real world Alice is actually this: 

                                   

 Summary:

• The mathematical contest (Mining) is for free.
• But in order to have a chance to win you need computers, which cost a lot of money and electricity.
• So you have a lot of costs, if you seriously want to compete with the other miners for the reward.  
• That is why the „best mathematicians“ are actually big companies with a lot of fast computers.

In the next episode I want to focus on further little important facts in the mathematical contest.
Join me on this journey where will will discover more and more about the eco-system of cryptocurrencies.