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23May

What is Bitcoin Mining?

May 23, 2021 Wael El Ghazzawi Education 31

We aim to explain bitcoin mining to a non technical person

It’s a good idea to explain the blockchain technology first. then, continue with the mining process.

1. You have one single block (a block is like a page of an account book). This is where people can send money to each other and those transactions will be recorded for ever and ever on that page in a way that is unchangeable.

2. These pages are linked together in a chain of pages (like links of a necklace). That is the blockchain.

3. Miners are like people who check if all transactions do make sense and they record those transactions on these blocks for ever and ever. So no one can go back and change them by making new blocks.

4. The miners are rewarded for this job with a little bit of money after solving a difficult math problem. That is why we call it mining: like gold miners who find gold or oil miners who find oil, bitcoin miners find bitcoins (or fractions of them called Satoshis).

5. But they can only mine bitcoins on a very specific schedule: every 10 minutes 12.5 new blocks will be mined (or created) and with that number of pages added to the blockchain. There is no other way of adding new pages or getting more bitcoins on the system, so they are very valuable.

6. If you want to rent one of those miners for mining your own bitcoins you also have to pay them.

7. The miners can choose which transactions they want to add on a page depending of many criteria like: what’s the fee that people paid for making that transaction.

8. This is why it’s so slow and expensive to send Bitcoin (BTC) from one wallet to another. You will have to pay a fee to the miners for them adding your transaction on one of these pages. They only do it if there is a reward for them: some BTC (or Satoshis).

9. So in the end all transactions are grouped by miners choosing according to this method or that method (depending always on the fee that was paid), and then they are added on those pages in a way that can’t be changed anymore.

10. You can also choose which of these miners you want to include your transaction or no. So it’s very cool because you have some power as well compared with banks where they pick all transactions but you don’t have any power.

11. And also every bitcoin has a history so you can trace them like in an account book, from where they came, to who owns them now, etc.

That’s it! That is the blockchain and mining explained to a non-technical person. easier than i thought?

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15Mar

Bitcoin as an Investment Asset

March 15, 2021 Wael El Ghazzawi Education 13

Any investment asset, be it stocks or property has some fundamental value that helps drive its overall price. As a mining or development company, the potential for profit determines how much you can sell for and even at what valuation you should do so. Since  Bitcoin or rather crypto currency in general is decentralized, there isn’t just one factor to consider but many

Why Invest?

So why would anyone want to invest in virtual assets? The primary reason is simple, there are gains to made by doing so. When you buy Bitcoin or another crypto currency as an alternative you are looking at two general directions when it comes to appreciation of your currency: #1 Holding – You expect the value of the coin will rise over time which will result in gains. #2 Speculation – You want to trade your tokens in the hope that you can make a profit by buying high and selling higher on an exchange.

Overpayment or underpayment?

The value of Bitcoin has always been justified through its limited supply, which is why it’s historical rise is so impressive compared to any stock market. Its price has increased over time as more people wanted to invest in it due to how well it was performing along with the fact that new coins would be mined over time until its supply finally runs out. When we look at other virtual currencies like Litecoin for example, they have tried to establish themselves by having improved technology and smaller supplies which could increase their overall success rate .   Due to all these reasons, you wouldn’t want to invest in a coin if you knew its supply was infinite which would render it’s value almost worthless.

This is the case with several other alt coins which will be covered later in this article.

Small supply doesn’t mean that it’s value can’t fall significantly overnight though. Speculation is a risky business and no one knows when an accident or country ban is going to happen so you just have to take the risk of buying at a high price hoping that it will drop before you sell. There are good reasons why some people don’t want to buy a currency at its current market price as they are expecting it to go lower. Its also worth noting that most exchanges don’t allow you to short any crypto assets, so your options would be limited if you wanted to bet against their future price unless you had already purchased them or were mining yourself without creating an account.

Who controls the supply?

Another aspect of crypto currency that can’t be ignored is how much control its market has compared to traditional stocks and shares. Traditional assets rely on companies to manage their supply and value based on its success or failure while crypto currencies are managed by miners who have pools which decide their output in order to keep the coins at a stable price . The only way you are able to increase your holding of digital assets is through mining, but if the coin isn’t profitable then it might not be worth it even though new coins are created every day. Litecoin for example uses an algorithm called Scrypt which makes it more difficult to mine than Bitcoin which uses SHA-256 as you would need faster rigs with higher memory. Normally you would be able to increase the performance of your miners by upgrading them but in this case, memory makes more difference than speed as faster hardware is usually specified with a higher amount of threads which can’t always determine its effectiveness. As mining pools get bigger and don’t have any competition from other miners they are able to control the supply until it reaches its maximum cap, resulting in coins being mined way faster than their official schedule.

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