Bitcoin Price Return Calculator with Inflation Adjustment
Cryptocurrency mining is painstaking, costly and only sporadically rewarding. Nonetheless, mining has a magnetic appeal for many investors interested in cryptocurrency because of the fact that miners are rewarded for their work with crypto tokens. And if you are technologically inclined, why not do it?
However, before you invest the time and equipment, read this explainer to see whether mining is really for you. We will focus primarily on Bitcoin throughout, we'll use "Bitcoin" when referring to the network or the cryptocurrency as a concept, and "bitcoin" when we're referring to a quantity of individual tokens. The primary draw for many Bitcoin miners is the prospect of being rewarded with valuable bitcoin tokens.
That said, you certainly don't have to be a miner to own cryptocurrency tokens. An example of the latter is Steemit , which is kind of like Medium except that users can reward bloggers by paying them in a proprietary cryptocurrency called STEEM. STEEM can then be traded elsewhere for bitcoin. The bitcoin reward that miners receive is an incentive which motivates people to assist in the primary purpose of mining: to support, legitimize and monitor the Bitcoin network and its blockchain.
Because these responsibilities are spread among many users all over the world, bitcoin is said to be a "decentralized" cryptocurrency, or one that does not rely on a central bank or government to oversee its regulation.
Miners are getting paid for their work as auditors. They are doing the work of verifying previous bitcoin transactions.
By verifying transactions, miners are helping to prevent the " double-spending problem. Double spending is a scenario in which a bitcoin owner illicitly spends the same bitcoin twice. If you were to try to spend both the real bill and the fake one, someone that took the trouble of looking at both of the bills' serial numbers would see that they were the same number, and thus one of them had to be false. What a bitcoin miner does is analogous to that—they check transactions to make sure that users have not illegitimately tried to spend the same bitcoin twice.
This isn't a perfect analogy—we'll explain in more detail below. Once a miner has verified 1 MB megabyte worth of bitcoin transactions , known as a "block," that miner is eligible to be rewarded with a quantity of bitcoin more about the bitcoin reward below as well. The 1 MB limit was set by Satoshi Nakamoto, and is a matter of controversy, as some miners believe the block size should be increased to accommodate more data, which would effectively mean that the bitcoin network could process and verify transactions more quickly.
It depends on how much data the transactions take up. To earn bitcoins, you need to meet two conditions. One is a matter of effort; one is a matter of luck. This process is also known as proof of work. The good news: No advanced math or computation is involved. You may have heard that miners are solving difficult mathematical problems—that's not exactly true. It's basically guesswork. The bad news: It's guesswork, but with the total number of possible guesses for each of these problems being on the order of trillions, it's incredibly arduous work.
In order to solve a problem first, miners need a lot of computing power. If you want to estimate how much bitcoin you could mine with your mining rig's hash rate, the site Cryptocompare offers a helpful calculator. In addition to lining the pockets of miners and supporting the bitcoin ecosystem, mining serves another vital purpose: It is the only way to release new cryptocurrency into circulation. In other words, miners are basically "minting" currency.
For example, as of Nov. In the absence of miners, Bitcoin as a network would still exist and be usable, but there would never be any additional bitcoin. There will eventually come a time when bitcoin mining ends; per the Bitcoin Protocol, the total number of bitcoins will be capped at 21 million. Aside from the short-term bitcoin payoff, being a coin miner can give you "voting" power when changes are proposed in the Bitcoin network protocol. The rewards for bitcoin mining are halved every four years or so.
When bitcoin was first mined in , mining one block would earn you 50 BTC. In , this was halved to 25 BTC. By , this was halved again to the current level of In about , the reward size will be halved again to 6. As of the time of writing, the reward for completing a block is If you want to keep track of precisely when these halvings will occur, you can consult the Bitcoin Clock , which updates this information in real time.
Interestingly, the market price of bitcoin has, throughout its history, tended to correspond closely to the marginal cost of mining a bitcoin.
Although early on in bitcoin's history individuals may have been able to compete for blocks with a regular at-home computer, this is no longer the case. The reason for this is that the difficulty of mining bitcoin changes over time. In order to ensure smooth functioning of the blockchain and its ability to process and verify transaction, the Bitcoin network aims to have one block produced every 10 minutes or so.
However, if there are one million mining rigs competing to solve the hash problem, they'll likely reach a solution faster than a scenario in which 10 mining rigs are working on the same problem. For that reason, Bitcoin is designed to evaluate and adjust the difficulty of mining every 2, blocks, or roughly every two weeks. When there is more computing power collectively working to mine for bitcoin, the difficulty level of mining increases in order to keep block production at a stable rate.
Less computing power means the difficulty level decreases. To get a sense of just how much computing power is involved, when Bitcoin launched in the initial difficulty level was one. As of Nov. All of this is to say that, in order to mine competitively, miners must now invest in powerful computer equipment like a GPU graphics processing unit or, more realistically, an application-specific integrated circuit ASIC.
The photo below is a makeshift, home-made mining machine. The graphics cards are those rectangular blocks with whirring circles. Note the sandwich twist-ties holding the graphics cards to the metal pole. This is probably not the most efficient way to mine, and as you can guess, many miners are in it as much for the fun and challenge as for the money.
The ins and outs of bitcoin mining can be difficult to understand as is. And there is no limit to how many guesses they get. Let's say I'm thinking of the number There is no "extra credit" for Friend B, even though B's answer was closer to the target answer of Now imagine that I pose the "guess what number I'm thinking of" question, but I'm not asking just three friends, and I'm not thinking of a number between 1 and Rather, I'm asking millions of would-be miners and I'm thinking of a digit hexadecimal number.
Now you see that it's going to be extremely hard to guess the right answer. In Bitcoin terms, simultaneous answers occur frequently, but at the end of the day, there can only be one winning answer. Typically, it is the miner who has done the most work, that s, the one that verifies the most transactions. The losing block then becomes an " orphan block. Miners who successfully solve the hash problem but who haven't verified the most transactions are not rewarded with bitcoin.
The number above has 64 digits. Easy enough to understand so far. As you probably noticed, that number consists not just of numbers, but also letters of the alphabet.
Why is that? To understand what these letters are doing in the middle of numbers, let's unpack the word "hexadecimal. As you know, we use the "decimal" system, which means it is base This, in turn, means that every digit of a multi-digit number has 10 possibilities, zero through nine.
In a hexadecimal system, each digit has 16 possibilities. But our numeric system only offers 10 ways of representing numbers zero through nine. That's why you have to stick letters in, specifically letters a, b, c, d, e and f. If you are mining bitcoin, you do not need to calculate the total value of that digit number the hash. I repeat: You do not need to calculate the total value of a hash. Remember that ELI5 analogy, where I wrote the number 19 on a piece of paper and put it in a sealed envelope?
In bitcoin mining terms, that metaphorical undisclosed number in the envelope is called the target hash. What miners are doing with those huge computers and dozens of cooling fans is guessing at the target hash. A nonce is short for "number only used once," and the nonce is the key to generating these bit hexadecimal numbers I keep talking about.
In Bitcoin mining, a nonce is 32 bits in size—much smaller than the hash, which is bits. In theory, you could achieve the same goal by rolling a sided die 64 times to arrive at random numbers, but why on earth would you want to do that?
The screenshot below, taken from the site Blockchain. You are looking at a summary of everything that happened when block was mined. The nonce that generated the "winning" hash was The target hash is shown on top. The term "Relayed by Antpool" refers to the fact that this particular block was completed by AntPool, one of the more successful mining pools more about mining pools below. As you see here, their contribution to the Bitcoin community is that they confirmed transactions for this block.
If you really want to see all of those transactions for this block, go to this page and scroll down to the heading "Transactions.
There is no minimum target, but there is a maximum target set by the Bitcoin Protocol. No target can be greater than this number:. Here are some examples of randomized hashes and the criteria for whether they will lead to success for the miner:. You'd have to get a fast mining rig, or, more realistically, join a mining pool—a group of coin miners who combine their computing power and split the mined bitcoin. Mining pools are comparable to those Powerball clubs whose members buy lottery tickets en masse and agree to share any winnings.
Where Do Transaction Fees Go?
Bitcoin is a peer-to-peer digital currency that can be safely and instantly sent to any person in the world. This currency is like electronic moneywhich you can share with friends or use to pay for your purchases. Bitcoin is a currency unit of Bitcoin. Physical bitcoins also exist, but, generally, bitcoin is just a number connected to the address. Physical bitcoins are just objects cslculations coins with inbuilt number. The main article: Satoshi Nakamoto. Satoshi Nakamoto is the name used by the unknown person or persons who developed bitcoin, authored the bitcoin white paper, and created and deployed bitcoin's original reference implementation.
What is Bitcoin Mining?
Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping system in existence. Bitcoin is the first implementation of a concept called "cryptocurrency", which was first described in by Wei Dai on the cypherpunks mailing list, suggesting the idea of a new form of money that uses cryptography to control its creation and transactions, rather than a central authority. The first Bitcoin specification and proof of concept was published in in a cryptography mailing list by Satoshi Nakamoto.
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I have a very approximate understanding that it is calculated based on the what are the calculations for bitcoin of hash power in all the bitcoin community over a specific period of time. But this is very vague.
Also I understand it can change very rapidly. Can it only increase? Is there any formula how to calculate it or predict it? Thanks for a detailed answer, Meni Rosenfeld. Just to make sure I got everything right.
I am summing up all the time, it took to generate the last blocks. And then apply the formula. The Bitcoin difficulty started at 1 and can never go below. Then for every blocks that are found, the timestamps of the blocks are compared to find out how much time it took to find blocks, call it T. The difficulty can what are the calculations for bitcoin or decrease depending on whether it took less or more than 2 weeks to find blocks.
Generally, the difficulty will cwlculations after the network hashrate drops. There is a bug in the implementation, due to which the calculation is based on the time to find http://trackmyurl.biz/bitcoin-trading-limit-stop-9829.html last blocks rather than Fixing it would require a hard fork calcluations is thus deferred for.
Calcuoations is possible to what are the calculations for bitcoin a rough estimate for the next difficulty change, based on the time to find the recent blocks. Nobody can make longer-term predictions for the future difficulty reliably, but anyone is free to speculate based on exchange rate trends, Moore's law and other hardware advances.
Meni's answer is good. I just want to give some practical detail method about difficulty calculation, perhaps helpful for future views of this question's answer. As we can see above, ars genesis block has a '1' difficulty and '1d00ffff' bits. The bitcoin bits means the 'target' hash value, the new generated block must meet a condition: block header's double SHA hash value must less than this 'target' value. Then, nitcoin find a new block, you must search that 32 bits nNonce value and nTimes and the hashMerkleRoot also until the block hash value has 4 bytes zero leading.
By the way, the nNonce is one of the fields in block header structure:. Ate SHA algorithm as well as any cryptographically secure hash algorithm produces output that will appear like an uniformly random sequencethe practical 'trial and error' method is the only way to find a new tje to meet the condition.
For human easy understanding about this 'target' hash value, We define the term 'difficulty', which means the average 'trial and error" numbers to calculahions a block to meet the 'target' condition. So far, you have all the detail about how to calculate the 'difficulty'. In some cases, we also use the simple format 1. I would like to give my 2 cents here, by expliciting the relationship between the probability of mining a block given the current target t and the corresponding difficulty d as it is calculated in bitcoin core.
Thus the probability of a single hash h being a valid hash is:. On the other hand d is calculated as follows, just as gary explained before calculafions transformed into decimals:. Actually if someone can explain how exactly the code maps to the formula above, that would be helpful. Combining those two formulas we obtain:. This is a direct implication of defining, in the genesis block, as difficulty 1 the one associated to the hexadecimal target 0x1d00ffffexpressed in what I think is called the bit compact form for bit numbers.
A nice question I believe is why this specific compact form was chosen for representing the target. Podcast: We chat with Major League Hacking about all-nighters, cup stacking, and therapy dogs. Listen. Home Questions Tags Users Unanswered. How is difficulty calculated? Ask Question. Asked 7 years ago. Active 10 months ade. Viewed 32k times. Salvador Dali. Salvador Dali Salvador Dali 3, what are the calculations for bitcoin 7 gold badges 25 25 silver badges 46 46 bronze badges.
I think follow up questions are better as comments to the answer. Basically yes, but no bjtcoin is actually needed - you can just take the timestamps of the last block and of the one blocks before, and subtract. Meni Rosenfeld Whatt Rosenfeld This is adequate for a separate SE question. Good answer, but one small, but capital point is eluded: how do the nodes fot the network agree on what is the difficulty? All nodes independently do the same calculation and get the same result.
The timestamp must be no sooner than the median of the past 11 blocks. Also, if a node receives a block with a timestamp more than 2 hours in the future it will reject it and not propagate it. Previous comments were about the what are the calculations for bitcoin, and "errors" hinted that it's the bug, so I assumed we're talking about.
So, yes. But there is yet another effect - a delay caused by the fact that in the beginning, the difficulty was 1 even though the hashrate calculwtions enough to justify it.
Transaction Fees Made Easy
A disproportionately large number of blocks are mined tthe pools rather than by individual miners. This pie chart displays the current distribution of total mining power calculagions pools:. Also in the software you tell the pool which Bitcoin address payouts should be sent to. What are the calculations for bitcoin miners are doing with those huge computers and dozens of cooling fans is guessing at the target hash. This analogy is similar to what a bitcoin miner does when they verify new transactions. Developers have suggested either 1 calculatuons the amount of data needed to verify each block or 2 increasing the number of transactions that each block can store. ASIC mining chip architecutre and processes are under continuous development, with lucrative rewards on offer to those who bring the latest and greatest innovations to market. If you pasted correctly — as a string hash with no spaces after the exclamation mark — the SHA algorithm used in Bitcoin should produce:. What is Bitcoin Mining? How Does Bitcoin Mining Work?