How Algorithms Can Assist with Bitcoin Mining

Story by: GUEST AUTHOR

Bitcoin and other cryptocurrencies have come a long way in a short span of time. The value of bitcoin in 2011 was just $0.06 and had virtually no takers. Fast forward to the present day and the very cryptocurrency now enjoys five-figure values as industries and governments grow accustomed to its use to pay for goods and services.

There are now 16 million bitcoin tokens in existence. The amount of bitcoin tokens allowed to exist at any one time has been hard-wired to be capped at 21 million, so time is running out if you want to get involved in mining. This cap was written into bitcoin’s source code as a means of guarding against future inflation. Cryptocurrencies are by nature decentralized and designed to be pro-libertarian and anti-quantitative easing.

Bitcoin cannot exist without mining. Mining is the process of interacting with the blockchain and completing a string of complex cryptographic calculations, comprising combinations of numbers and letters. Bitcoin miners utilize cryptographic algorithms that are extremely hard to reverse-engineer, but easy to verify the output. Miners have to ‘earn’ their bitcoin tokens. Every ten minutes or so, bitcoin blocks are released into the world. Miners use high-powered mining chips and heaps of electricity to mine overnight, underpinned by impeccable network connectivity and an effective cooling system for their machines.

Algorithms help not only to regularly mine the bitcoin, they also guarantee a single transaction history for each bitcoin, avoiding any bitcoins from being spent twice. In fact, machine learning algorithms are becoming a staple component in the finance sector. A growing number of hedge funds and even retail traders in the stock market are exploring the concept of algorithmic trading strategies. These are codes that can be written to open and close trades when specific conditions occur in the market, removing human emotion from trading based on psychological factors such as greed and fear.

In the early days of bitcoin mining, miners would perform cryptographic calculations on their own computer’s CPU. The more cryptographic hashes you can perform in a second, the greater the probability a miner has of mining a new bitcoin block. But, as time has moved on, application specific integrated circuit (ASIC) miners have made it nearly impossible to use the old-school way, which is where algorithms come in. Coral Health has authored a beginner’s guide to writing your own Proof-of-Work algorithm for mining bitcoin that takes things step-by-step.

Original story: https://www.newsbtc.com/2018/05/01/algorithms-can-assist-bitcoin-mining/

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