What is a Bitcoin Mining Pool?






One of the first questions thatanyone interested in mining cryptocurrencies faces is whether to mine solo or join a ‘pool’. There are a multitude of reasons both for and against mining pools. However, if the hash rate distributionacross the bitcoin network is anything to go by (and it is) then most miners are opting to join a pool. Here’s what you need to know.

If you’re deciding whether to join a mining pool or not, it can be helpful to think of it like a lottery syndicate – the pros and cons are exactly the same. Going solo means you won’t have to share the reward, but your odds of getting a reward are significantly decreased. Although a pool has a much larger chance of solving a block and winning the reward, that reward will be split between all the pool members.

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How bitcoin mining works






When you hear about bitcoin “mining,” you envisage coins being dug out of the ground. But bitcoin isn’t physical, so why do we call it mining?

Because it’s similar to gold mining in that the bitcoins exist in the protocol’s design (just as the gold exists underground), but they haven’t been brought out into the light yet (just as the gold hasn’t yet been dug up). The bitcoin protocol stipulates that 21 million bitcoins will exist at some point. What “miners” do is bring them out into the light, a few at a time.

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How do bitcoin transactions work?






Simple version:

If I want to send some of my bitcoin to you, I publish my intention and the nodes scan the entire bitcoin network to validate that I 1) have the bitcoin that I want to send, and 2) haven’t already sent it to someone else. Once that information is confirmed, my transaction gets included in a “block” which gets attached to the previous block – hence the term “blockchain.” Transactions can’t be undone or tampered with, because it would mean re-doing all the blocks that came after.

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What can you buy with bitcoins?






After an initial flurry of interest among merchants in accepting bitcoin in their retail or online stores, interest has largely died down as increasing bitcoin transaction fees and volatile price movements made it less attractive as a means of exchange

That doesn’t mean that there are no outlets to spend your bitcoin, however, far from it. It’s just that bitcoin volumes at these outlets has generally not met expectations, and by the time you read this, some may have discontinued that option.

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How to store your bitcoins - bitcoin wallets






Before owning any bitcoin, you need somewhere to store them. That place is called a “wallet.” Rather than actually holding your bitcoin, it holds the private key that allows you to access your bitcoin address (which is also your public key). If the wallet software is well designed, it will look as if your bitcoins are actually there, which makes using bitcoin more convenient and intuitive.

Actually, a wallet usually holds several private keys, and many bitcoin investors have several wallets.

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