What exactly is all the noise about with Bitcoin Mining?
RIDGWAY--Over a dozen residents attended the Ridgway Township Supervisors meeting on Tuesday evening to voice their displeasure over the Pin Oak Energy Partners site in the township that is being used as a Bitcoin mine.
But what exactly is all the noise about? When it comes to Bitcoin, the short answer is that it’s complicated.
Bitcoin was conceived by a person or group called Satoshi Nakamoto, a pseudonym listed on the original 2008 Bitcoin white paper describing how the cryptocurrency would work. On Jan. 3, 2009, Satoshi mined the first Bitcoin block on a simple personal computer with a standard central processing unit or CPU. In 2010 the first Bitcoin mine was produced that used the power of a Graphics Card or GPU to speed up the task. Then in 2013, the Chinese Company New Cannan began a Bitcoin mine using an application-specific integrated circuit (ASIC) that has now become the industry standard for Bitcoin miners.
Now for the complicated part. Bitcoin mining is the process by which new bitcoins are entered into circulation. It is also how the network confirms new transactions and is a critical component of the blockchain ledger’s maintenance and development. “Mining” is performed using sophisticated hardware that solves a computational math problem. The first computer to find the solution or get to the closest answer to the problem receives the next block of bitcoins. The miners are acting as auditors, confirming that each Bitcoin transaction is legitimate and valid, thus guaranteeing the “value” of the Bitcoin.
Besides the coins minted via the “genesis block,” which was the first block created by the founder Satoshi Nakamoto, every other bitcoin came into being because of miners. Because the rate of bitcoin “mined” is reduced over time, the final bitcoin won’t be circulated until around the year 2140.
To earn new bitcoins, the company needs to be the first miner to arrive at the correct answer, or closest solution, to a numeric problem. This process is also known as proof of work (PoW). No advanced math or computation is involved, despite the belief that miners solve complicated mathematical problems.
In a way, that’s true, but not because the math itself is complex. The computational power of trying to be the first miner to come up with the 64-digit hexadecimal number, or Hash, is basically guesswork. The answer, or closest number, is how a transaction with Bitcoin is verified and ensures the legitimacy of the cryptocurrency.
It’s a matter of randomness, but with the total number of possible guesses for each of these problems numbering in the trillions, it’s incredibly tedious work. And the number of possible solutions only increases with each miner that joins the mining network. To solve a problem first, miners need a lot of computing power.
To mine successfully, they need to have a high “hash rate,” which is measured in terms of gigahashes per second (GH/s) and terahashes per second (TH/s). The enormous amount of electrical power necessary is the primary “cost” of Bitcoin mining, besides the cost of the hardware itself. The Bitcoin miner needs access to large amounts of cheap electrical power to be profitable. This is where energy companies like Pin
Oak come into play.
Using the generators at its natural gas drilling platform in Ridgway Township, the Bitcoin miners have access to a dedicated power source at a very reasonable rate since they are directly at the power generating site. The generators at the site are not providing power to the electrical grid in Elk County or even Pennsylvania, but exclusively to the Bitcoin mine. With the entire process being handled remotely over the Internet, there is no office building on-site or staff that have to be paid to live in the area.
The money that is being produced using Elk County natural