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MODULE 4 |
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WHAT IS CRYPTOCURRENCY MINING?
Below are the basic information about cryptocurrency mining...
- Mining is the backbone that allows crypto to function
- Mining crypto is similar to the mining of gold, but its digital form
- High powered computers are used to process transactions that occur on the blockchain
- As these transactions are processed (or solved) the computers that helped work on the transaction are awarded with a small piece of the currency that was sent or received
- Without mining, there is no network to send and receive cryptocurrencies
- New coins are created as a reward for miners who secure & verify payments in the blockchain
- There are various different ways to mine crypto, some can be done right in your home!
In simple terms, mining is the process of confirming transactions and adding them to a public ledger. In order to add a transaction to the ledger, the “miner” must solve an increasingly-complex computational problem (sort of like a mathematical puzzle).
Mining is open source, so anyone can confirm the transaction. The first “miner” to solve the puzzle adds a “block” of transactions to the ledger. The way in which transactions, blocks, and the public blockchain ledger work together ensures that no one individual can easily add or change a block at will.
Once a block is added to the ledger, all correlating transactions are permanent and a small transaction fee is added to the miner’s wallet (along with newly created coins). The mining process is what gives value to the coins and is known as a proof-of-work system.
Mining is open source, so anyone can confirm the transaction. The first “miner” to solve the puzzle adds a “block” of transactions to the ledger. The way in which transactions, blocks, and the public blockchain ledger work together ensures that no one individual can easily add or change a block at will.
Once a block is added to the ledger, all correlating transactions are permanent and a small transaction fee is added to the miner’s wallet (along with newly created coins). The mining process is what gives value to the coins and is known as a proof-of-work system.
There are three primary ways of obtaining Bitcoins: buying them on an exchange, accepting them for goods and services and mining new ones. Mining is a process of adding transaction records to the Bitcoin’s public ledger called the Blockchain. It exists so that every transaction can be confirmed, and every single user of the network can access this ledger. It is also used to distinguish legitimate Bitcoin transactions from attempts of re-spending money that has already been spent somewhere else.
Mining — a process of record-keeping, done through the use of computer processing power.
Blockchain — a public distributed ledger where records of every Bitcoin transaction are held.
Mining — a process of record-keeping, done through the use of computer processing power.
Blockchain — a public distributed ledger where records of every Bitcoin transaction are held.
It is called Blockchain because it is literally a chain of blocks, which are lists of transactions made during a set period of time. When a block of transactions is generated, miners put it through a process. They apply a complex mathematical formula to the information in the block, subsequently turning it into a far shorter, seemingly random sequence of letters and numbers called a ‘hash’.
Hash — a fixed-length unique sequence of random digits, which can be created from data of any size.
A hash doesn’t only consist of information from the block of transactions, some other pieces of data are used too. Most importantly, the hash of the previous block stored in the Blockchain is included. While it’s relatively easy to produce a hash from a collection of data like a block of transactions, it’s practically impossible to know what data was used just by looking at the hash sequence. Moreover, each and every hash is unique, and changing just one character in a Bitcoin block completely changes the hash sequence.
Hash — a fixed-length unique sequence of random digits, which can be created from data of any size.
A hash doesn’t only consist of information from the block of transactions, some other pieces of data are used too. Most importantly, the hash of the previous block stored in the Blockchain is included. While it’s relatively easy to produce a hash from a collection of data like a block of transactions, it’s practically impossible to know what data was used just by looking at the hash sequence. Moreover, each and every hash is unique, and changing just one character in a Bitcoin block completely changes the hash sequence.
As you can see in the example above, no matter how much data is used as input, the hash will always stay the same length.
Because of these attributes, hash works as a digital wax seal. If someone tampers with just one block of transactions its hash will immediately change, and so will all the following hash sequences in the Blockchain. Thus, every attempt at fraud within the Bitcoin network will be easily spotted by everyone using it.
Because of these attributes, hash works as a digital wax seal. If someone tampers with just one block of transactions its hash will immediately change, and so will all the following hash sequences in the Blockchain. Thus, every attempt at fraud within the Bitcoin network will be easily spotted by everyone using it.
Rewards
Essentially, miners are serving the Bitcoin community by confirming every transaction and making sure that every single one of them is legitimate. They all compete with one another, using software written specifically to mine blocks. Every time a new block is ‘sealed off’, meaning that a miner has successfully created a correct hash sequence, he or she gets a reward.
As of October 2017, the bounty stands at 12.5 Bitcoins per block, and this value will decrease by half every 210,000 blocks. The overall number of Bitcoins is limited, so the more coins are mined, the more valuable each of them becomes. Thus, even though the amount of Bitcoins per block will inevitably decrease, the value of miners’ rewards will most likely stay the same or even rise.
Normally, it would be extremely easy to produce a hash from a collection of information, computers are really good at this. Hence why, to prevent users from hashing thousands of transaction blocks each second and mining all of the available Bitcoins within minutes, the Bitcoin network has to deliberately make the process more difficult.
Complications
This is done via a required ‘Proof of Work’. It is a system that requires some work from the service requester, usually meaning processing time by a computer. Producing a proof of work is a random process with low probability, so normally a lot of trial and error is required for a valid proof of work to be generated. When it comes to Bitcoins, hash is what serves as a proof of work.
Proof of Work — an economic measure used to ensure against fraudulent activities by requiring some work from the service requester, usually meaning processing time by a computer.
To complicate mining even further, something called the Bitcoin Difficulty is implemented in the process. It is a measure of how difficult it is to find a new block compared to the easiest it can ever be.
Bitcoin Difficulty — a measure of how difficult it is to generate a correct hash.
This measure is recalculated every 2016 blocks. It is designed so that mining one block will take approximately 10 minutes. As more miners join in, the rate of block generation inevitably goes up. Then, after the difficulty level is recalculated, it rises in order to compensate and bring the rate of block creating back down. Any block released by fraudulent miners that does not meet the required difficulty level will be rejected by everyone on the network, thus becoming worthless.
So, this process requires exertion and through it new currency slowly becomes available. The rate at which new coins appear resembles the rate at which commodities like gold are mined from the ground. Hence why the process is called ‘mining’.
Essentially, miners are serving the Bitcoin community by confirming every transaction and making sure that every single one of them is legitimate. They all compete with one another, using software written specifically to mine blocks. Every time a new block is ‘sealed off’, meaning that a miner has successfully created a correct hash sequence, he or she gets a reward.
As of October 2017, the bounty stands at 12.5 Bitcoins per block, and this value will decrease by half every 210,000 blocks. The overall number of Bitcoins is limited, so the more coins are mined, the more valuable each of them becomes. Thus, even though the amount of Bitcoins per block will inevitably decrease, the value of miners’ rewards will most likely stay the same or even rise.
Normally, it would be extremely easy to produce a hash from a collection of information, computers are really good at this. Hence why, to prevent users from hashing thousands of transaction blocks each second and mining all of the available Bitcoins within minutes, the Bitcoin network has to deliberately make the process more difficult.
Complications
This is done via a required ‘Proof of Work’. It is a system that requires some work from the service requester, usually meaning processing time by a computer. Producing a proof of work is a random process with low probability, so normally a lot of trial and error is required for a valid proof of work to be generated. When it comes to Bitcoins, hash is what serves as a proof of work.
Proof of Work — an economic measure used to ensure against fraudulent activities by requiring some work from the service requester, usually meaning processing time by a computer.
To complicate mining even further, something called the Bitcoin Difficulty is implemented in the process. It is a measure of how difficult it is to find a new block compared to the easiest it can ever be.
Bitcoin Difficulty — a measure of how difficult it is to generate a correct hash.
This measure is recalculated every 2016 blocks. It is designed so that mining one block will take approximately 10 minutes. As more miners join in, the rate of block generation inevitably goes up. Then, after the difficulty level is recalculated, it rises in order to compensate and bring the rate of block creating back down. Any block released by fraudulent miners that does not meet the required difficulty level will be rejected by everyone on the network, thus becoming worthless.
So, this process requires exertion and through it new currency slowly becomes available. The rate at which new coins appear resembles the rate at which commodities like gold are mined from the ground. Hence why the process is called ‘mining’.
You can’t stop things like Bitcoin. It will be everywhere and the world will have to readjust.
World governments will have to readjust”
– John McAfee, Founder of McAfee
WHAT IS CRYPTOCURRENCY TRADING?
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Cryptocurrency Trading is the Forex (Foreign Exchange) of cryptocurrencies. This means, you are able to trade different bitcoin and altcoin normally for USD and BTC. Cryptocurrency Trading is an alternative way to get involved in the Crypto-World!
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Why trade bitcoin and not Forex?Easy to enter
To start trading bitcoin and earning money, you really need less than an hour – for the how to steps, just scroll down. If you want to start trading Forex, you need to open an account – this takes several weeks until they send you the sign up forms and access code. Then it takes some days until you transfer some money from your bank account to your Forex Broker. We should not forget, that crypto-trading is also easy to leave. You just transfer your bitcoins out of the exchange into your wallet and you are done. We don’t even want to start talking about how nerve-racking it is to quit your broker. |
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Smaller Spread
One huge advantage over Forex are the low spreads. The spread is the difference between the ask and bid price of the market maker. Spread Example: Let us analyse the spread of EUR/USD. The ask and bid are 1.0933 and 1.0931 respectively (data from 27.02.2016). The spread is 0.0002. Percent-wise, this is a spread of 0.0002/1.0933 = 0.018% Now let us see the spread in bitcoin to USD. The ask price for 1 BTC is 429 USD, while the bid price is 428.999 USD (data from 27.02.2016). This equals to a spread of 0.001 USD or 0.001/429 = 0.0002%. A smaller spread means, that when you exchange, you have made nearly no loss. On the contrary in Forex (btw. other than eur/usd have even higher spreads) after you exchange, you have already made a loss of 0.018%. Which is not insignificant. Never the less, don’t forget to check your transaction fees at your exchange. |
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Margin at Cryptoexchanges
The features of leverage and margin trading is possible on some Forex as well as on Cryptocurrency Exchanges. Margin Trading: You are allowed to use funding from peer-to-peer margin funding providers. This means, that you can borrow buying/selling power, but you need to alocate some funds (=margin) which won’t be accecible until you return the lending capital. For example, you only have 429 USD but you want to buy 2 BTC. This is possible, but you will have to pay some interest after you close your position. For example, the BTC close at 450. So you have made 2*21 USD = 42$ winnings. Then you only need to subtract the low interest (about 2%) and you have your final earnings, which are higher, if you predicted the course of the trade correctly. Though you can lose more, when you have a losing position. |
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Leverage at Cryptoexchanges
You have the option to use leverage trading on some Forex and Cryptocurrency Exchanges. Leverage Trading is the possibility to trade an amount, which you don’t have at your disposal. Normaly Cryptocurrency Exchanges offer a leverage of 1:10. This means, that for each dollar you get 10 dollars of buying power. In conclusion, this means a higher risk and a possible higher profit. |
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Getting Started Trading Cryptocurrencies like Bitcoin
The first thing you need is a wallet. Only then you are able to buy crypto-currencies like bitcoin or ethereum and protect them. We have made a guide on how to obtain bitcoin already, check it out if you don’t already posses one. The majority of cryptocurrency exchanges have a free a wallet along the ability to trade, but we suggest, that you don’t put all your bitcoin or any cryptocurrency at one place. This way you can minimize your risk of an exchange getting broke (e.g. MT GOX), being scammed or getting hacked. Security: Don’t forget to activate your two-factor-authentication to be more safe. Most exchanges offer cryptocurrency trading with the need of bitcoin (for example: ethereum for bitcoin, or bitcoin for litecoin), this is why bitcoin is the first thing you should consider buying. |
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MODULE 5:
CLICK BUTTON BELOW TO PROCEED TO MODULE 5
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Copyright © 2017
WBI CRYPTO UNIVERSITY
All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of WBI Crypto University.
WBI CRYPTO UNIVERSITY
All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of WBI Crypto University.