Bitcoin Mining: Does It Involve a Shovel?

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Does Bitcoin mining involve a shovel? The simple answer to this question is no. However, it is more complicated than that.

Using the underlying blockchain technology, Bitcoin (BTC) is the first decentralized digital currency that permits peer-to-peer transfers without the use of third-party mediators like banks, governments, agents, or brokers. Regardless of location, anyone on the network can send Bitcoins to another user on the network; all you need to do is create an account on the network, deposit some BTC into it, and then you can send the BTC. How are Bitcoins added to an account? You can either mine them or buy them online. More on mining in a bit!

BTC can be used as a kind of investment or for online transactions and is mostly employed for purchasing products and services.

Here are three fundamental concepts to grasp in order to better appreciate this novel and potent technology.

  • Its author is still unidentified

On October 31, 2008, the anonymous Satoshi Nakamoto published the Bitcoin whitepaper “Bitcoin: A Peer-to-Peer Electronic Cash System” on the Cryptography Correspondence Group email group. The true identity of this person(s) remains a mystery.

  • BTC, bitcoin, or Bitcoin?

Whether to capitalize or shorten bitcoin is up for debate. However, here’s what each of them means:

Bitcoin refers to the BTC network and protocol when written with an uppercase ‘B’.

bitcoin: Only the cryptocurrency is meant by the lowercase version of the word.

BTC: Again, the acronym BTC stands for bitcoin and refers to digital currency.

  •  A shovel is not used in bitcoin “mining”

BTC payouts motivate bitcoin miners, who employ specialized computer hardware to support network security. Miners compete to solve a highly difficult mathematical problem based on a cryptographic hash algorithm in order to earn rewards.

Bitcoin Mining and Circulation

The maximum supply cap for BTC, set by its creator Satoshi Nakamoto in the source code to be 21 million, is perplexing. However, analysts have recognized it as a great benefit because the oldest cryptocurrency has a consistent price and value because of the limited quantity.

More bitcoins have been mined and put into circulation since the genesis Bitcoin block, which was created in 2009 with 50 bitcoins. BTC mining makes ensuring that transaction blocks are generated, stacked in the correct sequence, and mathematically traceable. The amount of bitcoins in circulation rises as a result of the reward of bitcoins that accompany block formation.

The cleverly designed BTC architecture ensures that a block is found every 10 minutes and that a predetermined BTC reward is given for each block that is mined.

So contrary to what you might have thought before, Bitcoin mining doesn’t involve a pick, a shovel and a digger.

 

 

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Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.