How does Bitcoin mining work?
Bitcoin mining – how does it work?
Behind the term “mining” are computations performed by computers, which are constructed in such a way that their result is not easy to obtain. In fact, the difficulty of the bills is so high that they cannot be solved “just like that” by even the most powerful computers in the world! In a very simplified way, it can be said that digital coins are simply a reward for solving extremely difficult mathematical operations, for which enormous computing power is necessary. How does it look in practice?
Let’s start with the results of Bitcoin mining. The first is the release of completely new digital coins previously unavailable to anyone. The second is related to the maintenance of network security through the ongoing verification of information about the ongoing transactions. When someone sends Bitcoin somewhere, we call it a transaction. Conventional transactions, e.g. banking or in-store transactions, are based on bank documentation or its confirmations, for example in the form of an invoice.
Bitcoin miners, or de facto computers, do the same thing by collecting information about all transactions in “blocks” and then adding it to a public register called blockchain. When a miner adds a new block to a blockchain, one of his tasks is to make sure that entries in it are error-free – in particular, that Bitcoin is not duplicated, for example.
The Bitcoin network that records 300,000 transactions every day means a lot of work. As payment for its execution, miners receive coins each time a new block of transactions is added to the blockchain. The coins that are released with the introduction of a new block into the chain are called the prize. Every 210,000 added blocks, the reward is split in half – in 2009, each block had 50 bitcoins, in 2013 it was 25, and at the moment the reward per block is 6.25 BTC. Halving, the moment when the prize is distributed, will continue until around 2140.
What is it actually about?
Imagine four friends. One of them selects a number between 1-100, writes it down on a piece of paper and puts it in an envelope. Let’s say it is the number 42. The rest of the friends are asked to guess a number less than or equal to that number. Friend A points to 55, so the group loses, because 55> 42. Friend B points to 40 and C points to 35. In this case, they both indicated the correct answer
It works by finding a hexadecimal number of 64 characters called a “hash” that is equal to or less than the value determined by the protocol. In other words, this job is just guesswork
Bitcoin mining and rewards
To receive the prize, the miner must meet 2 conditions. The first is to validate the transaction with a total size of 1 megabyte. The second is more specific and involves guessing the correct hash, which is a 64-character hexadecimal number. All the digging and the associated enormous computing power required is just for guessing these numbers. When a computer, after billions of tries, finally finds the value given by the protocol, a block of transactions is added to the network. At this point, all other miners validate the hash and the transactions performed. They then copy the block, add it to their own chain (which is also one of the copies of the “valid” chain) and deal with the next new block.