An Overview of the Origin of the Bitcoin
Bitcoin mining involves cryptographic calculations. The Bitcoin is mined in blocks. Unlike paper money hose printing and distribution are decided by the government, Bitcoins lack a centralized government. In Bitcoin mining, the miners will make use of specialized software for solving mathematical problems. In exchange, they are given Bitcoins. The miners will also keep the network secure through approval of transactions. Block sizes are small when the numbers of generated coins are many.
The amount of Bitcoins released with every mined block is the block reward and this is halved every 21,000 blocks. So, block rewards which started at 50 Bitcoins in the year 2009 have been halved to 25 in 2012 and then to 12.5 in 2016. This reducing block reward eventually results in release of total 21 million Bitcoin and according to the existing protocols, this is the cap number. So, no more Bitcoins can be mined after attaining this figure.
The process of mining will involve computing capacity, power, and time; so, the longer you have mined Bitcoins, the more power the mining entails. So the increased speed of Bitcoins generated will become inversely proportional and will drop. And this is why the number of coins will not cross 21,000,000. When the cost of the mined Bitcoins crosses the costs of mining, the process is economically reasonable. So, with mining becoming more and more difficult and challenging, the less-efficient devices will simply leave.
In earlier times the digital enthusiasts would use computer CPUs for mining the Bitcoin. But this was not very lucrative and costs of hardware and processing power that were needed for mining would exceed value of Bitcoins. With increase in Bitcoin value slowly, thousands of coins started to be generated every day. The coins became more valuable and greater number of people started to join this gold rush. This is when the developers began to modify the software and use the GPU or Graphic Processing Units for their advantages.
Their architecture was such that the GPUs could run the calculations much quicker. Moreover, it was possible to increase the computing capacity by joining many GPUs together. A min farm developed which comprised of a motherboard, a RAM unit and a CPU and this could host nearly 5-6 robust graphic accelerators.
The biggest drawback of this approach was the huge power consumption. This is why gate arrays came about; these miners were able to guarantee nearly five times advantage as far as power consumption went. But the FPGA mining also became very costly as compared to the GPU mining.
Both these devices finally became useless with the introduction of ASIC miners. These are the application specific IC or integrated circuit miners. These were designed exclusively for doing cryptographic calculations and their power efficiency was much greater. Butterfly Labs were pioneers in producing these and started using the technology ever since June 2012. Because of mining challenges the activity shifted to data centers from the smaller mining farms. This is because data centers could guarantee much higher volume of computational power.
Before concluding a discussion on the history of the emergence of Bitcoin mining, it is important to make a mention of cloud Bitcoin mining contracts. This is the newest method for mining Bitcoin. This makes use of dedicated cloud hosting for mining the cryptocurrency. So, the biggest advantage is that there is no requirement for buying new costly equipments. One will not need to bear high electricity costs or spend time adjusting the miners. You can simply pay hosting fees for the cloud mining company services. Another new method is hacking mining. Here cryptocurrency mining is carried out by using devices belonging to others. The malicious agents will simply need to own botnet in order to set up a mining facility. They will also require malicious software for penetrating computers of the other users secretly. The costs of getting these shady services are naturally much lower. The attacker gets access to small computer power from each person. In 2014 for instance, a hacker had used loopholes in Synology servers to earn about 200,000 Dogecoins. In some other cases the same cryptocurrency had been mined from several devices. The hackers can often read the software code faster than the producers can. They therefore learn the security loopholes faster.
To make profits through Bitcoin mining, the miners will need to select the right method depending on an analysis of parameters like stability, installation, profitability, connectivity, maintenance, timeliness etc. Increasing difficulties in mining Bitcoins and the urge to make greater profits will continue to push developers into finding innovative solutions. So, in this sense, the era of Bitcoin mining has really just begun.
The process of mining will involve computing capacity, power, and time; so, the longer you have mined Bitcoins, the more power the mining entails. So the increased speed of Bitcoins generated will become inversely proportional and will drop. And this is why the number of coins will not cross 21,000,000. When the cost of the mined Bitcoins crosses the costs of mining, the process is economically reasonable. So, with mining becoming more and more difficult and challenging, the less-efficient devices will simply leave.
In earlier times the digital enthusiasts would use computer CPUs for mining the Bitcoin. But this was not very lucrative and costs of hardware and processing power that were needed for mining would exceed value of Bitcoins. With increase in Bitcoin value slowly, thousands of coins started to be generated every day. The coins became more valuable and greater number of people started to join this gold rush. This is when the developers began to modify the software and use the GPU or Graphic Processing Units for their advantages.
Their architecture was such that the GPUs could run the calculations much quicker. Moreover, it was possible to increase the computing capacity by joining many GPUs together. A min farm developed which comprised of a motherboard, a RAM unit and a CPU and this could host nearly 5-6 robust graphic accelerators.
The biggest drawback of this approach was the huge power consumption. This is why gate arrays came about; these miners were able to guarantee nearly five times advantage as far as power consumption went. But the FPGA mining also became very costly as compared to the GPU mining.
Both these devices finally became useless with the introduction of ASIC miners. These are the application specific IC or integrated circuit miners. These were designed exclusively for doing cryptographic calculations and their power efficiency was much greater. Butterfly Labs were pioneers in producing these and started using the technology ever since June 2012. Because of mining challenges the activity shifted to data centers from the smaller mining farms. This is because data centers could guarantee much higher volume of computational power.
Before concluding a discussion on the history of the emergence of Bitcoin mining, it is important to make a mention of cloud Bitcoin mining contracts. This is the newest method for mining Bitcoin. This makes use of dedicated cloud hosting for mining the cryptocurrency. So, the biggest advantage is that there is no requirement for buying new costly equipments. One will not need to bear high electricity costs or spend time adjusting the miners. You can simply pay hosting fees for the cloud mining company services. Another new method is hacking mining. Here cryptocurrency mining is carried out by using devices belonging to others. The malicious agents will simply need to own botnet in order to set up a mining facility. They will also require malicious software for penetrating computers of the other users secretly. The costs of getting these shady services are naturally much lower. The attacker gets access to small computer power from each person. In 2014 for instance, a hacker had used loopholes in Synology servers to earn about 200,000 Dogecoins. In some other cases the same cryptocurrency had been mined from several devices. The hackers can often read the software code faster than the producers can. They therefore learn the security loopholes faster.
To make profits through Bitcoin mining, the miners will need to select the right method depending on an analysis of parameters like stability, installation, profitability, connectivity, maintenance, timeliness etc. Increasing difficulties in mining Bitcoins and the urge to make greater profits will continue to push developers into finding innovative solutions. So, in this sense, the era of Bitcoin mining has really just begun.
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