Here’s how you can get rich by mining Bitcoins (Part 1)
Bitcoin
Cryptocurrency is the rave these days. Bitcoin, Ethereum and among 900 other such digital currencies are being traded and mined with people making millions of dollars off them. It is also being projected as the next big thing in finance, particularly because of the underlying technology of the cryptocurrency - Blockchain, which renders transparency to all the transactions made using the currency. That is something the banks and your regular fiat currency cannot promise.

But transparency aside, the most astonishing aspect of these cryptocurrencies is the fact that you can create them yourselves. Well, not technically create them. Mine them, to be precise. While fiat currency like dollar bills are printed by the government, Bitcoins are discovered by mining them.

No. You don't need to start digging the ground to find these currencies. Bitcoins and other cryptocurrencies are mined using brute force computing. In that sense, there is a gold rush on right now and people are spending lakhs of rupees on computer rigs to create wealth in the form of crypto currencies.

Now, we know your palms are sweaty to start mining. But let's do some theory before the practical, shall we? Let's learn what exactly is mining, before learning how to mine.

Essentially, you can use the computer lying around at your place to mine Bitcoins but it's not that easy. Mining is essentially computers competing with each other to validate the Bitcoin's blockchain which is nothing but the general ledger that keeps a record of all transactions made using Bitcoins. There are hundreds of Bitcoin transactions being made across the world and considering that it not a government-supervised currency, somebody has to keep a record of all such transactions to prevent fraud from being committed. The onus automatically falls on our intelligent sidekicks, the computers considering that we as humans can't even trust our next door neighbour.

Bitcoin transactions are written into blocks and all the blocks are then compiled into a general ledger, which is the blockchain. Using the blockchain, anyone can check any transaction that happened between Bitcoin addresses at any point in time. But does anyone make sure that no one tampers with the blockchain?

This is ensured by making every block unique by adding a hash at the end of it. Once a block is created, the miners apply a complex mathematical formula to it, that turns the blocks into a shorter, random sequence of numbers and letters which is called hash. Hashes can also be easily produced by people, so the authenticity is maintained by using the hash from the previous block to create the hash for the new one. If someone tampers with any of the hashes, the entire public becomes aware of it.

Essentially, this practice of using the hash from the block is where the miners compete in. It's called "sealing off" off a block and once a miner successfully creates a block and seals it, he earns 25 Bitcoins.

Over time, as more and more Bitcoins have been discovered, the Bitcoin network which oversees the cryptocurrencies' movements, have made it more and more difficult to mine them. As a result, while earlier a high-end gaming rig was enough to mine one or two Bitcoin over a month, now there are a lot more people competing for sealing off the blocks, which means the hardware requirement has gotten exponentially higher.

This is because the Bitcoin protocol demands a proof of work which is basically that the hash needs to look a certain way. But there is no way of knowing what the hash should look like before creating the block. As a result, a miner has to make several attempts at creating the hash which is what takes the most amount of time and computational power.

We will explain the hardware you need to mine these Bitcoins in the next part. Stay tuned!