WHAT IS BLOCKCHAIN HOW IS IT CREATED AND WHAT IS MINING?

December 19, 2020

WHAT IS BLOCKCHAIN HOW IS IT CREATED AND WHAT IS MINING? 

In accounting, to keep the accounts of everything that goes out and comes in, they are made in the general ledger, that information is stored in a centralized way in a bank, a company, on a server or another place; now in a decentralized, anonymous, secure and immutable wayThe record of that book can be publicly distributed by hundreds or thousands of computers around the world, that action is called the blockchain. 

Blockchain is a platform created with codes, which allows the distribution or monitoring of products or services such as money transfers and transactions in a secure way, which cannot be modified and thus avoid theft and corruption, it is a technology that most people associate it with cryptocurrencies, and more specifically with Bitcoin. 

But the reality is 2 different things, simply that cryptocurrencies use this technology to circulate decentralized money. Blockchain can also be used for activities such as wills, digital voting, transfer of property registration, medical report, copyright, monitoring of food distribution or any other product among others. 

Blockchain is a platform created by several companies, some of the leaders are IBM,  etherum or Nvidia of this we will talk a little later. Now in December 2020, there are around 5000 cryptocurrencies on the market, all of them use blockchain technology to distribute decentralized money, and most of them to be able to finance themselves use the game of mining. 

HOW IS BLOCKCHAIN FORMED AND HOW IS MINING CARRIED OUT? 

To explain how blockchains are created and how to mine, we are going to use Bitcoin as an example, which was the first cryptocurrency that was born in 2009 after the 2008 financial crisis, to carry out its plan or better, the distribution of decentralized money it uses blockchain technology that has already existed since 1991, but only gained momentum when Bitcoin was born. 

In 2010, when this cryptocurrency began to be sold, it only cost 0.08 cents on the dollar, today December 2020 has a price of more than US $19,000, whoever invested the only US$100 in 2010 is already a millionaire. 

Whoever created bitcoin said who because 11 years later it is still not known with certainty who its inventor was, this person created 21 million Bitcoins, in order to win them he created a game called mining and the miners are the computers and once all the coins are used up, no one knows what will happen, that is the debate. 

Bitcoin can process up to 7 transactions per second and when a person or company uses its blockchain, the general ledger information is distributed anonymously by all the thousands of computers that are part of the game and called miners, they store the information. 

Then if that person or company wants to transfer certain money all the miners verify that it is correct if it is, they allow them to move the money if it is not, they block it, this makes it practically impossible for them to steal the money or for a corrupt modify it to steal it. 

Bitcoin allows up to 51% of its miners to agree to allow the transaction if some bad guys want to modify a sum, they have first to hack 51% of the miners, and bitcoin is the largest that surely has hundreds of thousands of miners scattered throughout the world which is practically impossible to adulterate the amount of money, and there are even cryptocurrencies that to allow a transition must match up to 80% of the miners. 

That is why the more blocks and chains there are, the more difficult it is to modify or adulterate the sum or steal it, the blockchains can be private or public and in case the unexpected happens, the bitcoin blockchain is public and tracking a transaction is impossible, but it’s possible to know where the operation was done. 

Right, how the blockchain or chain blocks are formed and how mining is played? 

To fill a block, bitcoin has to make 2700 transactions and on average this happens every 10 minutes, one block can be filled now, the next in 2 minutes and then in 40 minutes etc. 

Once full, you have to create another block, but both must be chained together, to create that chain there is the game of mining, which nobody understands because it is called that since it really is a puzzle game and for others of riddles composed of letters and numbers and those who must put together that puzzle are the computers that are called miners and are part of the blockchain. 

At the beginning of 2010 when Bitcoin began, anyone could mine or let’s say put together the puzzle with a simple and old computer since in the game there were not many miners or competitors and it was easy to put it together, today the chain is long and it is getting longer. It is difficult to put together the game, that is why the computers that are used now are increasingly powerful and sophisticated. Several start-ups or entrepreneurs have bought 60 or 100 of the most sophisticated computers for games and they are working 24 hours a day. 

According to a bitcoin mining entrepreneur told the BBC that the profits are enormous that despite the fact that cryptocurrencies are a very volatile market it rises and falls strongly, even so, after paying expenses and the largest that is the electricity, they still get 75% profit. 

The amount of energy that these computers consume is enormous since they work 24 hours a day and they must also have a cooler on since they get very hot, increasing energy consumption, so much so that all the energy that is spent in the game and in transactions made through bitcoin could power 3.5 million houses and etherum which is the second-largest cryptocurrency to 1 million houses. 

At the beginning of this reading, I wrote about Nvidia, creator of a blockchain platform, the shares of this company in the stock market have risen up to almost 600%, not because of blockchain but because its main product is graphics processors for video games, they are the most popular and famous, they are the best in the market, that is why they increasingly manufacture more powerful laptops or computers, with this processor, they use it to mine cryptocurrencies, in our example bitcoin. 

Once the miner who first manages to assemble the puzzle that is letters and numbers wins the game and the full block is closed and then a new block is formed with the same letters and numbers that he/she won and they are chained together, which is making impossible to break the chain, do this once this has done, the game again starts again.  

Which is the prize? There are 2; for each transaction that a user makes, pays a commission and that money is distributed as a reward among all the miners for helping in the process and the most powerful computer that makes a transaction faster, the reward received is greater, the 2nd prize is the big oneevery time a miner puts together a puzzle, they are given 12.5 bitcoin, at today’s price of almost US$ 20,000, they win about US$ 238,000 for each game. 

What do you think about this? Please drop your comments. 

Note: If you usually leave your computer connected all night, I advise you to disconnect it completely since if a hacker takes control of your computer, they will put it to mine all night while you sleep, and it is not strange if your electricity bill arrives higher, and your appliance keeps warm. 

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Thank you very much and comment. hgmenco 

 

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