We took a short breather from our series of articles about bitcoin in order to write about other important Jackpot Capital matters and to give you all a chance to fully absorb the bitcoin tutorial up to the point of bitcoin mining. The term “mining” for the way bitcoins are created is another of the bitcoin terms that is hard to wrap our heads around.
We have already talked about the term “blockchain” in the same context as a confusing term that should denote a simple and non-confusing process or structure. We simply have to accept that in the world of so-called cryptocurrencies—what should be more properly called alternative currencies—there are terms that confuse subjects that are actually quite easy to understand.
We know that bitcoin was created originally as an alternative to government money which was seen, and is increasingly seen, as paper backed by nothing. Bitcoin was also created in the digital age to combat double spending which government banking systems do as a matter of course but which are a threat to “real money”.
The term mining is perfectly easy to understand in the context of digging in a mine for minerals. The term is also easy to understand in its metaphorical sense of “digging” in an established system for some benefit. In this context, taking a casino bonus such as the Jackpot Capital Welcome Bonus is a form of “mining” and it is easy to separate the metaphorical mining from real mining.
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This is the single most important aspect of all alternative currencies including bitcoin. In the government financial system, there is a central bank. This central bank gives its authority to local or private banks to handle everyday financial transactions.
This system works well enough under the best of conditions. Bitcoin was created in part because the unbacked currencies that prevailed and continue to prevail throughout the world had finally come to exist within a condition that was far from the best condition. In other words, the central banking system had begun to spring leaks and many people felt that there was a need for a decentralized banking and financial system.
The blockchain and bitcoin mining were the two sides of the same coin, so to speak: how to have both a decentralized system and a reliable and trustworthy system.
In the normal centralized banking system, a few banks have all the power to record transactions. If we trust the banks and the bankers and if the currency is “sound” this system works perfectly well. But, if we stop trusting the bank, or the bankers, or the currency, we need an alternative system.
Bitcoin and all alternative systems are, in effect, an attempt at a radical and massive decentralization of banking and currency creation. In a very real sense, everyone has the ability to become a “banker” of sorts!
It is very important to keep in mind that bitcoin serves two parallel and equally important functions: to be an alternative to government money and to decentralize a banking apparatus that had become less than ideally trustworthy.
The system that was developed was to have the system create an equation. The equation was complex enough that only very strong computers could generate enough possible answers that one of the answers might actually solve the equation.
This sounds hopelessly complex until you go back to the idea of a central bank and realize that the central authority given the responsibility to “know” with geometric logic as Captain Queeg said in The Caine Mutiny (kudos to author Herman Wouk) exactly how much “money” the economy of that country needed at any single moment and exactly what the interest rate should be for borrowed money.
In a small country, perhaps a central bank could get a grasp of the millions of financial transactions that occur on any given day. But in large countries, where there may be trillions of transactions every day, it is functionally impossible for a central bank and a central authority to know exactly how much money the economy needs every day and exactly what the ideal interest rate might be that day.
Bitcoin in effect solves this problem by saying that it isn’t an important matter at all. Financial transactions are the important thing. Financial transactions need a medium of exchange and bitcoin as a currency is a medium of exchange. So, if people want to use bitcoin for buying and selling, they will do so knowing what the value of any good or service is in relation to the number of bitcoin in circulation.
A good or service is a relatively fixed matter and, if bitcoins are also relatively fixed, then the value of one bitcoin to one dollar should also be relatively fixed. Unfortunately, bitcoins are still so new to most people that it is being treated as a commodity like corn or pork bellies rather than as a currency. That means that there is far too much speculation in bitcoins. This situation will calm down eventually and then bitcoin will simply be an alternative currency.
The owner of the computer that solves the new equation gets to add a block to the blockchain. He or she chooses which transactions to put in the block that will be added to the blockchain. The new block then goes out to the entire network of blocks and is verified.
The creator of the new block receives some bitcoin for their trouble and effort. It is this process: solving the equation, putting transactions in a box and sending the box to the network, and then receiving bitcoin as a type of payment for your trouble and effort all taken together is called bitcoin mining.
The bitcoin mining system also works in a self-adjusting manner. If there are too many miners at any moment, the equation will be harder to solve. If there are not enough miners at any given moment, the equation, which is never easy to solve, will nevertheless be easier to solve than normally.
This self-adjusting process was the genius creation of the inventor of bitcoin as it directly challenges the central banking systems of all countries and all currencies which have become notoriously not self-adjusting. Central banks and governments simply spend money that doesn’t really exist and then they say voila, the money does exist!
Bitcoin mining is a complicated process because it is an attempt to take money out of the hands of central banks and governments.
It naturally takes a good long time to fully grasp the bitcoin system. It helps to constantly keep in mind that it was always intended to work in the opposite manner that government money and centralized banking work.
As a way to deposit and withdraw money at Jackpot Capital casino, bitcoin works perfectly well. We might not think that bitcoin will ever fully replace dollars, euro, or pounds but as an alternative, bitcoin certainly has a place.
As this article goes to publication, the world is still involved in the long, slow process of recovery from the corona virus pandemic. So, as we have been saying for months, please stay healthy, wear a mask when outdoors, wash your hands often, and emerge at the end of this long tunnel in much better shape than most government currencies are in today!
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