Cryptocurrency Mining: What It Is, How It Works?


During the past few years, the world witnessed a digital revolution that covered all aspects of our life and made it much easier in many areas. This development includes money. An unknown person who called himself a pseudonym, Satoshi Nakamoto, invented the concept of Bitcoin, which is electronic money that is far from the idea of ‚Äč‚Äčtraditional, tangible money. .


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But it seems a little complicated, and there may be many questions on your mind now about what Bitcoin is, its features and future as a method of payment etc., and this is what we will try to explain in this article.


What is Bitcoin?


Bitcoin is a digital code consisting of blocks of processed data used in online purchases, and is often credited with being the first cryptocurrency in the world, and is best defined as an electronic currency that exists only electronically and centrally, meaning that it does not have A central issuance authority or political institution that controls the amount of Bitcoin in circulation, and you will not need a broker or a third party when paying in Bitcoin; Dealing with it is done by the peer-to-peer system. 1


Bitcoin is not printed like the dollar or the euro but is produced by computers all over the world, using free software.


Bitcoin is the first example of what we call cryptocurrencies, meaning cryptocurrency verification.


Bitcoin was launched as a currency in 2009, and there are currently 21 million bitcoins that are tradable without being scalable, they are so fragmented that you can transfer 0.000001 parts of bitcoin, and this is a feature to be calculated.


Why do people want Bitcoin?


Like anything in a market economy, the price of bitcoin is entirely dependent on supply and demand. This may seem strange due to the use of money in pricing everything, but for bitcoin there is supply and demand for money, the more abundant the things offered the less valuable, while limited things like bitcoin are of high value and this earns them the trust of people.


The main reason people want bitcoin is because it is a safe way to save, as you can save your money by buying real estate, shares in a company, etc., but the government can simply confiscate all of this, while bitcoin is not confiscable. Of course, not using it as a savings method is the only reason people want it. Some people want bitcoin so that they can buy something in the darknet, or because they want to transfer some money to their relatives abroad. 3


What are Bitcoin features?


Bitcoin has the following advantages:


  • Reliability: Bitcoin transactions are performed through a cryptographic user network. The advantage here is that there is no need to trust a third medium, so there is no need to go through a bank or other financial institution, as users can make meaningful transactions that are completely safe. This gives Bitcoin flexibility that users in banks or even institutions such as Paypal do not charge, which may charge fees for every transaction, while Bitcoin transactions do not incur any service fees. This fact alone made the currency particularly attractive internationally and was the reason for its rapid development.


  • Ease: One of the most powerful factors Bitcoin has in its favor is its ease of use; There is no need to go to an ATM or go to a bank. Even compared to online transactions, the currency is easy to use, as there is no need to enter long debit or credit card numbers with security codes; All users have to do is log in to their account. They can also make purchases without worrying about entering sensitive financial information on any site, making them vulnerable to piracy.


  • Independence: The financial crisis in Cyprus, in which the state threatened to impose a tax on the bank accounts of individuals, caused investors to resent the financial sector, and began looking for new ways to store money, and Bitcoin was one of the solutions, as it is not subject to the authority of banks. In short, users want to put their money in something they can trust, and they are willing to put this trust in a virtual currency at the expense of a bank.


  • Transparency: All transactions via Bitcoin are recorded and clear, as each transaction is recorded on the network so that there is a recent record to know the balance of each user in addition to the amount and location of each transaction.


  • Decentralization: Millions of people are searching for a currency immune to the constantly changing movement of national currencies and the roles that governing bodies play in manipulating them by adopting a virtual currency. Bitcoin allows users an area unaffected by the actions of sovereign countries, when using Bitcoin you will not have to worry about exchange rates and will not lose as currency rates change.


Five negatives threaten Bitcoin continuity

  • Volatility: Bitcoin is hovering around $ 15 from September 2012 to February 2013; In May, it rose to over $ 150. Because of the lack of market value and liquidity, it is difficult to predict the long-term value of the currency, and this is an obstacle for those who wish to adopt the currency in the long term, so who knows how much its value will be after a year from now?
  • Future government laws: It remains unclear how developed countries, especially the United States, Canada, the United Kingdom, and Russia, will deal with the new hypothetical phenomenon. Although the US recently recognized the currency and stated that it will be subject to current laws regarding currency trading, Many skeptics believe that as the currency continues to rise, governments will be forced to impose new laws on Bitcoin that make them less attractive to international users.
  • Limited expansion capacity: In its current state, Bitcoin has limitations in terms of scalability, and to expand as expected, the programs and servers that support this currency will have to improve dramatically. There is currently no indication of how Bitcoin creators work to solve this issue, while many Bitcoin insiders do not view this as a major obstacle, skeptics cite this issue as one of the reasons buyers are cautious.
  • Security Fears: Although Bitcoin is built on a form of identity-based ownership, many security concerns remain about its future. Because Bitcoin is a relatively new technology, it is still vulnerable to piracy. Recently, a currency fraud method has been exposed, as they choose a target that exchanges bitcoin for cash and stops it. This sudden shock of the system pushes the value of Bitcoin down, then opportunistically, these hackers enter and buy Bitcoin at a reduced price and are just waiting for the value to be increased to collect the profits. This type of fraud cannot be stopped, and there is no governing body to report fraud.
  • Not subject to experiment: users should be careful about placing a lot of confidence in a currency that has not yet borne the test of time, unlike other currencies such as the dollar that existed more than two centuries ago. There are at least empirical data that experts can refer to in trying to assess its behavior. This is what Bitcoin lacks and is something to consider before throwing your life’s savings into this coin.


In conclusion: Although it was only 10 years after Bitcoin innovation, it proved its worth and garnered huge popularity and formed the solution and the best way to escape from the power of banks, taxes, etc., but there is a question that always presents itself is what the future holds for bitcoin and other virtual currencies ?.


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