The abc of bitcoin cloud mining

The “ABC” of Bitcoin Cloud Mining What is Bitcoin?

The first digital currency ever known to the world is BITCOIN. It could be the future of ecommerce as it is paving a way for virtual money. Just like the conventional currenciesdollars, yen and Euros, it can be traded, exchanged and holds a value in the market. The fact it is inflation immune has bestowed Bitcoins with worldwide popularity in a short span of time. Without any intermediary like bank or Paypal, Bitcoins can be transferred online at a faster rate, with no requirement of personal details that are otherwise required.

Figure 1.Bitcoin Basics

Though it’s just the beginning of this new currency to hit the mainstream, yet it is widely accepted as it is not controlled by any central authority. It works through a decentralized, peer-to-peer network for convenient, prompt, secured and transparent operations.

The idea of this digital asset was conceptualized by the programmer, Satoshi Nokamoto in the year 2008 by the name Cryptocurrency.

Later, in the year 2009 he developed Bitcoin software to manufacture its network and first unit of Bitcoin Cryptocurrency, named Bitcoins.

People showed interest in this new currency in the year 2013, from then onwards Bitcoins attained respectability and might penetrate the mainstream in coming years.

Satoshi Nakamoto - Man Behind Bitcoin

How does Bitcoin work?

Since, Bitcoins are operated without the involvement of bank, agency or government no one can take away your money from you. The currency is decentralized and thus you own it completely. For those who lack trust in the banking system or third party payment, it’s a huge benefit. A transaction through Bitcoins is signed digitally and hence completely secured.

Bitcoin Working in Process

Due to the absence of central issuing body, production and transfer of Cryptocurrency is handled by the process called mining. It involves complex mathematical calculations on

specific software programs to produce Bitcoin. The mathematical formula is available freely to be used by anyone around the world. However, for performing cryptological functions, advanced computer systems are required that can perform billions of calculations precisely.

Additionally, software is an open source making Bitcoin network completely transparent.

Some Basic Facts about Bitcoin And Its Mining Have you come across words like Cryptocurrency or Bitcoin cloud mining lately? It a common practice that’s driving people crazy who want to earn more leisurely. Bitcoin was created with the idea of facilitating a currency which is decentralized. The fact no government or central agency would be monitoring the currency or related activities like online Bitcoin mining made it a magnetic invention in this digital world.

Would you believe if I say you can make money while sleeping? Well, such are the exciting benefits of cloud mining Bitcoins that you shouldn’t miss out. Basically, bitcoins are generated through a computational process called mining. And when a person opts to do online bitcoin mining without the stress of hardware maintenance, cloud mining of Bitcoins comes into play.

Types of Bitcoin Mining : Bitcoin cloud mining could be of three types- hosted, virtual hosted and leased hashing – 1. Hosted Mining : The mining machine is hosted by the provider.

2. Virtual Hosted : One can create his own virtual server and mining software.

3. Leased Hashing : It is all about renting a specific amount of a hashing power without having a dedicated physical or virtual computer.

How Transaction Works for Bitcoin?

Bitcoin transaction can be described as the exchange taking place electrically between bitcoin wallets. This transaction is secured through digital signature and completely transparent. It means anyone in the network can come to know about any transaction and through its history even the place where bitcoins have been produced can be found out.

Bitcoin transaction is meant for those who can’t wait for the prices to go up and want to earn instant through transactions.

Not Bitcoins, Only Bitcoin Transcation Exists

Yes, it might sound weird but this is the fact. Many people have the misconception that bitcoins exist on hard drive but when you look at any bitcoin address, no bitcoin can be located there. It signifies there is no as such physical object which can be called bitcoins.

Actually, these are the records of transactions taking place between various addresses and accordingly the value is added to them. Each and every transaction which ever happened in the network is stored in wide public ledger system known as blockchain.

In order to know the balance of a bitcoin address, information needs to be retrieved through restructuring of address via a blockchain.

Steps Involved In Bitcoin Transaction It takes place in three steps, namely input, amount and output. Let’s say a transaction is taking place between X and Y, then it can be described as: 1. Input- The record of bitcoin address that was used to send bitcoins initially to “X” from some any other random person.

2. Amount- Represents the value or number of bitcoins which “X” has decided to send to “Y”.

3. Output- It becomes the Y’s bitcoin address.

Requirements to Send Bitcoins Two essential things required to transfer Bitcoin is the address and private key. While bitcoin address is nothing but a randomly generated sequence of number and letters, private key is the same but meant to be kept as a secret. It means anyone can look at your bitcoin address but only the person holding private key can have access to it.

Bitcoin transaction in process

In order to send bitcoins, X would use his private key to digitally sign the deal and fill input (his address), amount and output(Y’s address) details. Bitcoins are sent from X’s bitcoin wallet to the massive bitcoin network from where miners verify the transaction before putting it to a transaction block and then finally solve it.

Transaction Makes You Wait Until the verification process is completed by miners, X has to wait. It is the protocol of bitcoin mining network to make sure every block takes an estimated time period of ten minutes to get mined. It means you have to be little patient before downloading digital commodities or getting benefited in other way. However, some merchants might not make you wait assuming that you won’t use bitcoins before the confirmation of transaction. It is generally common in case of low value transactions where the chances of fraud are comparatively low.

Transaction with Different Input & Output Values Since bitcoins are just the records of transactions, it is possible that many different yet interrelated transactions get associated with one bitcoin address. Lets’ understand it better taking an example where X gets two bitcoins from A, three bitcoins from B and one bitcoin from C. All these three transactions took place at different locations and at different timings.

Now, X won’t have total six bitcoins, instead all of them are just stored as three different transaction records.

Now, suppose X wants to send half bitcoin to his friend Y which doesn’t matches with either of his previous transaction records. As X can’t make his transaction split into small amount, he has to use any one of his previous transaction records and the remaining amount will be returned to him as change. For instance, if X sends two bitcoins that he got from A to Y, then A becomes the input while Y is the output. Now, X’s wallet will create two outputs for this transaction wherein half bitcoin is for Y and remaining will be transferred to the new address of X created to hold his change.

Bitcoin Transactions Are Divisible Satoshi is the smallest unit of bitcoin currency. It is equal to one hundred millionth of a bitcoin. Therefore, it is possible to send as small as 4400 satoshi through a bitcoin network.

Transaction Fees It is quite possible that you have to pay for the transaction but not always. Under which circumstances you will be charged depends upon many factors. When recipient doesn’t picks up the part of a transaction or returns the change, then it is charges as the transaction fees.

It is the opportunity for miners to solve the transaction block and earn rewards. As block reward is decreasing day after day, soon all transactions would be charged certain amount.

Confirmation of Transaction Earlier, there was nothing like giving receipts or any confirmation mail to ensure transaction took place successfully. However, as the system is upgrading, payment system might get altered. In the version 0.9, it can be expected to be user friendly and well established. In fact upcoming payment processors like Gainbitcoin, has already adopted advanced features to facilitate satisfactory transactions to users.