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How Bitcoin Calculators Work

In another post, we looked at the different Bitcoin calculators you might need as a Bitcoin investor or even as just an ordinary user.

To recap, there are three primary types of Bitcoin calculators; currency conversion, overtime Bitcoin calculators and Bitcoin mining calculators.

In this post, we explore how these Bitcoin calculators work.

We should note that what we often consider as a Bitcoin calculator is just the front end of a complex system. 

Indeed, the system that makes a Bitcoin calculator is in three primary parts. In this post, we go through each one of them.

Indeed, the user interface (UI) is at the top, and it is what as a user you interact with. You feed your raw data on the UI, and it displays the results for you.

The Bitcoin calculator UI can be on a page on an exchange, a news site, a company website, a standalone web page, or even a mobile application. 

UI is the easier part to build and indeed, when designing it, aesthetics and user experience (UX) are more important than functionality. 

And that is because much of the functionality is handled or taken care of by the other levels of the system.

It is also important to point out that most of the Bitcoin calculators out there, aside from the UI, they share most of the other parts of the system. 

We will how that is the case in a moment.

The second layer of the Bitcoin calculator is the Exchange Application Programming Interface (API). 

This is a JSON protocol that connects the calculator front end to the online currency exchange rate, mining, or price chart data aggregators. 

Usually, it is the data aggregator to design and release the API to whoever wants to use their live data. 

Indeed, the data aggregator is the next part of the system. This is usually a company that collects and shares, through the API, both live and historical data such as foreign exchange rates. 

Aside from tracking this data from different sources, the aggregator blends it using a special algorithm so that from many slightly different values, they end up providing a single rate or set of data for every pairing.

Therefore, the data aggregator must have as many sources. The more it has, the better as that guarantees a better quality of the feed it provides. 

In other words, the higher the number of data points, the better the representation of the reality in the marketplace.

Usually, the company has to form partnerships with sources of its data. That sometimes involves paying for access. 

And due to this latter fact, most data aggregators for Bitcoin calculators charge those who end up using the data a fee. Not really the person using the calculator but the platform that is displaying it.

An example of an exchange data aggregator mostly used within the Bitcoin space is the OpenExchangeRates.org.

At the bottom of the system that Bitcoin calculators use are the sources of the raw data that informs the calculator. The origins of the raw data are mostly exchanges, trading platforms and mining pools.

And on these platforms, the exchange rates and other types of data are determined by the market forces of supply and demand.  

It is essential to point out between all the levels of the system, some forms of APIs are used to automate the data transmission so that an end-user has a live feed experience.

This is a simple representation of the system that powers Bitcoin calculators. Of course, in real life, everything is more complicated. Nevertheless, hopefully, this gives you an idea of how the system works.