Grasping the entire concept of Bitcoin in one go is all but impossible for anyone. Even the people who have been involved in Bitcoin for several years will still find it difficult to relay the message in layman’s terms. Bitcoin mining, for example, is one of the processes that is hard to grasp, as people do not see the correlation between a Bitcoin miner, generating new coins, and confirming transactions. But in the end, it is rather easy to explain, albeit rather technical.
Also read: What Gives Bitcoin Value?
What Is Bitcoin Mining Exactly?
In this day and age of technology, the concept of “mining” has taken on a vastly different form compared to a century ago. In the past, miners users to wear helmets and wing pickaxes in tunnels below the surface to extract resources and precious metals. Bitcoin mining is something entirely different, as it is not just about generating new resources.
To understand what Bitcoin mining really is, look at it as a way of using efforts – computer hardware, electricity, and software – for a chance to create something valuable in return – new bitcoins, confirming network transactions, and securing the protocol. This is also why people refer to Bitcoin as a proof of work digital currency, as the work put in results in proof of new coins and confirmed transactions.
Speaking of the generation of new bitcoins, this process is done entirely by computers. Every computer in the world can run software to start mining Bitcoin, and depending on how powerful the machine is, the results will either be great, or not so great. One thing to keep in mind is how there are thousands of people around the world involved in Bitcoin mining. Through this vast combination of computational power on a global scale, blocks of network data are created.
These network blocks of data contain the transactions deemed valid through a consensus protocol, as well as the reward for Bitcoin miners. New Bitcoins are generated through Bitcoin mining, as they pay miners for solving the network block. Individual miners are paid out according to how much computational power they attributed to this process.
A network block will contain transaction records which are added to Bitcoin’s public ledger of transactions, which is also called the blockchain. Every transaction found in a network block is deemed valid by the network, and that process is done through Bitcoin nodes. If the majority of Bitcoin nodes considers the transaction to be legitimate, it will be queued for inclusion in the next network blocks.
Bitcoin mining is designed specifically to be very resource-intensive, and as more time progresses, more computational power is required to find new blocks. New bitcoins are generated at a slow but steady rate, and the final Bitcoin mining reward will be distributed somewhere in 2140.
Last but not least, Bitcoin mining ensures the Bitcoin nodes can reach a tamper-resistant consensus when it comes to determining if transactions should be accepted or not. In a way, Bitcoin mining is a motivation for people to provide security for the system – the validation of transactions and to keep the economy growing – by bringing new coins in circulation.
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