Knowledge Center – BHARAT GREEN CHAIN PRIVATE LIMITED

WHAT IS BITCOIN

Bitcoin, introduced in 2009 by the pseudonymous Satoshi Nakamoto, is a groundbreaking digital currency. Emerging from the 2007-2008 subprime mortgage crisis, it operates on a decentralized, peer-to-peer network, accessible worldwide via smartphones or computers. Bitcoin's cryptography-based system ensures robust security and immunity to inflation and political influences, distinguishing it from traditional currencies.

Functioning independently of central banks or governments, Bitcoin uses open-source code, with any computer running it acting as a node in its blockchain network. This enables unrestricted issuance and trading of bitcoins. Over time, Bitcoin has become one of the world's most valuable currencies, with its value peaking at over $68,000 in 2021 and a market capitalization exceeding $1.2 trillion.

WHAT IS THE BLOCK CHAIN

Blockchain is the foundational technology behind Bitcoin. It acts as a decentralized ledger, recording all transactions. Every 10 minutes, transaction data is updated and grouped into blocks, which are validated by the entire network. This ensures each node has a complete ledger, making transaction data accessible yet highly secure against tampering.

Blockchain's primary goal is to provide secure, tamper-proof information storage, ensuring data integrity. Beyond cryptocurrencies, blockchain technology has versatile applications across various industries, offering innovative solutions for multiple sectors.

WHAT IS A NODE

As commonly expressed, blockchain operates as a peer-to-peer transaction system, with the peer being the node. Nodes, essentially computers and servers, play the role of verifying and storing new information within the blockchain.

Bitcoin comprises four types of nodes:

Full nodes: These nodes possess and disseminate copies of the entire blockchain network.
Super nodes: These nodes serve to connect other full nodes throughout the entire blockchain network.
Light nodes: Similar to full nodes, light nodes retain a portion of the entire blockchain network.
Mining nodes: These nodes are responsible for generating new blocks for the blockchain.

WHAT IS MINING

Mining is the process of issuing Bitcoin, carried out by miners to construct the blockchain. Essentially, mining involves recording transactions on the blockchain ledger, incentivizing miners with rewards to sustain operations and manage the Bitcoin network.

According to the Bitcoin protocol, a new block is generated approximately every 10 minutes, recording transactions from the preceding 10 minutes. Nodes compete for accounting privileges through a specific mechanism to earn mining rewards. When a new block is added, the responsible node broadcasts it to the network. Other nodes then verify the block for illicit transactions. Once validated by the majority, the block is appended to the blockchain, ensuring its integrity and security.

WHAT ARE ASIC MINERS

ASIC miners, also known as Application-Specific Integrated Circuits, are specialized computers designed for the sole purpose of mining cryptocurrency. Unlike traditional CPUs or GPUs, ASIC miners are built with a specific hashing algorithm in mind, making them far more efficient at mining a particular cryptocurrency compared to general-purpose hardware.

Here’s a breakdown of their key features:

Highly Efficient: ASIC miners are optimized for hashing functions used in cryptocurrency mining, leading to significantly lower power consumption compared to CPUs or GPUs for the same task.
Limited Functionality: Unlike CPUs or GPUs, ASIC miners are not designed for general computing tasks. They can only perform the specific hashing algorithm they are designed for.
Rapid Hashing Rate: ASIC miners can generate a much higher hash rate (number of hashes calculated per second) compared to other hardware, making them ideal for mining competitively.

Here are some examples of popular cryptocurrencies that rely on ASIC miners:

As computational power increases, individual miners find it more challenging to mine coins, leading to the rise of mining pools. In these pools, miners combine their computational resources by connecting to shared online servers, boosting their chances of discovering new blocks. When a block is successfully mined, rewards are distributed among miners based on their contribution and the pool's rules.
Originally, Satoshi Nakamoto's protocol awarded 50 bitcoins every 10 minutes, with the reward halving every four years to maintain scarcity. Currently, miners earn 6.25 bitcoins per block, with the next halving expected in 2024, an event often followed by a price surge.
Miners also earn from transaction fees, which users pay to prioritize their transactions. These fees fluctuate based on network congestion, generally being lower in bear markets and higher in bull markets.

WHAT IS A MINING POOL

WHAT IS MINING REWARD

Miners use ASIC mining machines to extract Bitcoin, incurring hardware and electricity costs. Despite these expenses, miners worldwide engage eagerly in mining due to the rewards in Bitcoin and transaction fees. According to Satoshi Nakamoto's protocol, 50 bitcoins were initially mined every 10 minutes. This reward halves every four years to maintain scarcity. Currently, miners receive 6.25 bitcoins per session, with the next halving expected in 2024. Bitcoin prices typically surge after halving events.
Transaction fees also incentivize miners. Users transferring Bitcoin pay fees to motivate miners to prioritize their transactions. The fee amount isn't based on the transfer size but rather on network congestion. Thus, fees are usually lower during bear markets and higher during bull markets, reflecting the varying demand for transaction processing.

WHAT IS PROOF OF WORK

The Proof of Work (PoW) algorithm serves as a consensus mechanism mandating a network participant to solve a computational cryptographic puzzle to validate a new block in the blockchain. This verification process safeguards the network against malicious activities, such as double-spending attempts.
Miners perform PoW verifications, ensuring a robust level of security and facilitating a decentralized approach to transaction verification.
Numerous cryptocurrencies employ the PoW algorithm, including Bitcoin, Bitcoin Cash, Bitcoin SV, Ethereum, Litecoin, Dogecoin, KASPA, Zcash, Dash and various others.

WHAT ARE MINING DATA CENTRES

Cryptocurrency mining is primarily conducted in data centres, which benefit from cheaper electricity compared to smaller operations using grid power. Data centres provide a professional environment for faster maintenance, management, and scalability of mining operations. Modern data centres also prioritize sustainability by incorporating renewable energy sources, enhancing the perception of cryptocurrency mining and contributing to environmental conservation efforts.