Bitcoin mining – the basics

Selling bitcoin is a serious business. It requires a sharp attentive mind, an idea about world financial markets and consumer needs.

In order to sell bitcoin, you need to mine it. Mining is technical process of discovering this cryptocurrency using the power of modern computer hardware.

How does this work?

People exchange bitcoins across the network. This transaction has to be recorded as bitcoin is not physical currency and is real only by its transaction history. The network collects the transactions made during a set period into a list. This is called a block. The miner confirms the transactions and writes them into a general ledger.

To sell bitcoins, you as a miner would then explore the general ledger which is a blockchain and put it through the process of applying a mathematical formula to the blockchain and turning it into a hash - which is shorter series of chars and numbers stored along with the block.

Individual bitcoin exchanges and transactions along with other data such as the previous hash come together to form a unique hash. This becomes a digital version of the certificate of legitimacy or the wax seal.

Once as a miner you seal off the block and each time you successfully create a hash, you are rewarded 25 bitcoins, the blockchain is updated and everyone on the network knows you pulled it off! There is no way of faking it as each hash is interconnected as explained above so you are competing in a fair and square space.

The network to balance off the ease with which computers can create this hash, demands a proof of work only by providing which the bitcoin protocol accepts your efforts as legitimate and correct and you get your reward. Simply put, your hash has to look a certain way with a certain number of zeroes at the start which is a challenge in itself and you may have to make many attempts to get the correct hash. This is done by using a unique change using something called the nonce. Remember, you cannot change the basic data that has come to you.

Finally with your reward of 25 bitcoins, you can sell it on the network!

You can sell bitcoins in the following ways  depending on the laws of the territory you are in:

 

  • Go into direct trading with a person with or without an intermediary.
  • Head to an online exchange which in some places is also considered a Money Transmitting Business.
  • Find a peer to peer marketplace that bring together bitcoin owners who wish to obtain discounted goods with their bitcoin and those who want to obtain the cryptocurrency with credit/debit cards to mutually help each other.

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