In Bitcoin mining, complex math puzzles are solved by the miners to create new Bitcoins. To solve these complex math puzzles huge mining rigs and electricity is required. The miner who solves the puzzles first is awarded Bitcoin.
What are these Bitcoin mining puzzles?
For the creation of Bitcoin and to earn rewards, miners are required to solve the math puzzles. The puzzle is referred to as proof of work (POW), as a reference to the amount of computational work done by the miners to mine Bitcoin.
On the Bitcoin network, miners are trying to identify the hash, a 64-digit hexadecimal number, that is either less than or is equal to the target hash in SHA256, POW algorithm of Bitcoin. Huge mining rigs and computational power is required to guess all possible 64-digit combination. Any system that can guess a number less than or equal to the hash is rewarded.
For example, if a person is asked to guess a number between 1 and 500, which has already been thought by another person and written on the sheet of paper. It is not compulsory to guess the same number but he can guess a number less than or equal to the number. If more than one person is guessing, then the one who guessed smaller and the closest number wins. Consider that the number thought was 220. One person guesses 221, the other guesses 250, the third guesses 215, and the fourth guesses 218. So the fourth one will be the winner as he guessed the number which was smaller than 220 and was close to it.
The same is the situation with the Bitcoin mining puzzle, except there is a 64-digit hexadecimal number and thousands of computing systems.
A common term that is associated with solving a math problem in mining is mining difficulty. The difficulty in solving the math problem and creating Bitcoin is referred to as mining difficulty. Mining difficulty has a direct effect on the rate at which Bitcoin is created.
After every two weeks or after 2,016 blocks mining difficulty will change. The new difficulty will be completely based upon the efficiency of the miners during the previous cycle. The numbers of new miners that have joined the Bitcoins network also affect the mining difficulty level. With an increase in the number of miners, there is an increase in the computing power deployed to mine the cryptocurrency.
In 2020, the mining difficulty level was more than 16 trillion, meaning that the chance of a system to produce a hash below the required hash was 1 in 16 trillion. The probability of winning a Powerball jackpot with a single lottery ticket is much higher than getting the correct hash in a single try.
Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.
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