Bitcoin Mining / Masternodes

How does Bitcoin Mining work?

In the fiduciary system of traditional currencies, such as the Euro or the Dollar, governments can print more bills or credit when they need to. But, in Bitcoin, cryptocurrencies can’t be printed – they are discovered instead. Thousands of computers around the world “mine” cryptocurrencies, competing with each other.

Every minute, thousands of transactions are conducted between users. The Bitcoin network collects all the information on the transactions consummated during a period of time in a list called Block.

The job of “miners” is to confirm these transactions, the Block, and record the information in a public place – known as Blockchain.

To mine Bitcoin, one needs to have a computer with high processing power. Given the difficulty of mining Bitcoin, it’s currently not possible to do it with a personal computer. Miners buy machines that are specially designed to mine bitcoin, such as ASICS.

Their job is to find a sequence that makes a bitcoin transaction block compatible with the previous. To do this, the computer needs to conduct thousands of calculations per second to find the perfect match, something known as Proof of Work.

After finding a compatible sequence, the miner receives a bitcoin reward for each block they mine. This reward was created with the intention of paying the people who lend computing power to keep the Bitcoin network functional.

Thousands of computers compete for the reward of blocks on a daily basis. A Bitcoin transaction block is formed every 10 minutes, so the competition restarts every 10 minutes.


Masternodes

Besides the Proof of Work protocol, there are others such as the Proof of Stake, popularly known as Masternode.

Masternodes help ensure network security and extra services such as:

  • Instant transactions;
  • Anonymous transactions.

This concept started to become popular with the DASH currency. Those who participate in the network are rewarded at 45% of all profit for the execution of the Masternodes, but these, instead of machines, are a financial share in the portfolio itself, worth 1000 DASH, the remaining profit will go to the miners who make their machines available.