So what exactly is mining you ask? Well, to explain that, we need to explain the blockchain. And then we will provide you with the information about, how bitcoin mining works.
All the transactions for a cryptocurrency are recorded on one ledger called the blockchain.
But, with so many transactions going on, we need some way of confirming all the transactions are actually real. And that everyone is clear on the correct version of the blockchain. Imagine sorting out a google document where thousands of people were editing it all at once, yikes!
Transactions are collecting in a block (hence the chain of blocks). This takes some period of time. After that, they need to be confirmed.
This is where the miners come in.
In order to understand in more details how bitcoin mining works you can read our other article How to mine Bitcoin. There we explain in details what you need to be a bitcoin miner.
You may be asking yourself why we are going through all this trouble just to record a list of transactions. This is essentially what Banks do.
Miners will take the block generated and run an algorithm (a sort of mathematical set of instructions) on the block. Next to happen will be to produce a smaller piece of data called a hash which matches with the block. The hash has some code also from the block before it so that you can tell exactly where in the sequence of the blockchain it should go into.
Why go through all this trouble? Well, the hash is something we can produce from the data. But producing the entire block from the hash is almost nearly impossible. Someone can’t fake a block with some changed values (like giving themselves a tonne of Bitcoin) because it won’t produce the same hash. The hash allows us to be confident in the fidelity of the blockchain as long as it matches the corresponding hash. An unbreakable enigma code which works as a seal of approval. The reason why is cryptocurrency.
Bitcoin Q&A: Miners, pools, and consensus https://t.co/pj4ugmOw8d
— Andreas ☮ 🌈 ⚛ ⚖ 🌐 📡 📖 📹 🔑 🛩 (@aantonop) April 22, 2018
Sounds complicated right? Why go all through the trouble of doing all that though? Well, the first person to create a hash for a block is rewarded with 25 BTC. So all the miners are trying to compete against each other in a computers arms race trying to be the fastest to solve the hash and claim a prize of which the value is only getting higher and higher.
You may be asking yourself why we are going through all this trouble just to record a list of transactions. This is essentially what Banks do. This whole system frees us from the control of the bank or the government. We now have our own decentralized system. This System is checked and stored by everyone which can be checked and confirmed by the use of the hashes giving you full confidence in the transactions. Now, that’s the wave of the future and it’s all thanks to the mining.
Tell us, do you understand now how bitcoin mining works? Comment and let us share our life experience with bitcoin mining process.
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