What Is Bitcoin Mining
The very first obvious question a person, who monitors Bitcoin prices, may ask is how to get this cryptocurrency. Even though there are many ways to acquire the tokens, the most well-known and widespread are:
Whereas the first two methods are quite clear, the third one may raise many questions. Let’s have a look at them!
What is mining?
In order to get to the heart of mining, one has to get acquainted with the Blockchain – the public ledger where each confirmed Bitcoin transaction is listed. Anyone who has access to the network is able to look through the list of transactions and check the amount of Bitcoins sent from one public key address to another – as a result, any suspicious transaction will be distinguished at once.
The Blockchain received its name for a reason – all transactions added within a specific period of time are joined together into a block. All blocks are interconnected in a chain. Each change made to one transaction within the block will affect others, thus it is impossible to change information about transactions and stay unnoticed.
Mining is a process that adds transaction records to blocks by using computer processing power. As soon as the generation of a block is completed, it is recorded in the blockchain.
Basically, a block is quite heavy in terms of the amount of data stored in it, that is why each block is transformed into a shorter sequence of letters and numbers, called a “hash”. The amount of symbols in each hash is fixed, and what is more important, the initial data can be of any size.
Hash is responsible for the protection of data stored in blocks – while being created, hash uses information not just from the current block but from the previous blocks as well. The creation of hash is quite simple, however, it is almost impossible to find out what particular data was used. You won’t find two identical hashes, but their length is the same.
Any change made to the block transforms the hash, thus hack attacks or frauds will be easily spotted.
What rewards do miners get for their work?
The work that miners do for the cryptocommunity cannot be overemphasized as they confirm transactions and check their validity. Not all miners are rewarded for the completion of the hash – the reward goes to the miner who creates a hash sequence that records a new block to the ledger.
Currently, the reward per block is 12.5 Bitcoins and with completion of other 210,000 blocks the reward will decrease by half.
It is a well-known fact that the amount of Bitcoins is limited, hence their value increases with each mined coin. But why haven’t millions of users completed mining of all available Bitcoins yet?
Why is mining getting more difficult?
The process of mining is complicated because here the so-called “Proof of Work” enters the stage. This system checks each hash for validity − it gets convinced that the hash is not just a set of random symbols. In the context of mining this is the measure aimed to protect the network from scam activities, and the process of conformation may take some time.
More than that, the process is also measured by the Bitcoin Difficulty – an indicator that shows the complexity of the finding of a new block. The difficulty is determined automatically after a certain period of time and is different for each cryptocurrency. Bitcoin Difficulty is re-counted every 2016 blocks. In general, it takes no more than 10 minutes to process one block. The more users participate in the process, the higher is the rate of the block generation. However, the Bitcoin Difficulty level rises and lowers the rate of the block creation.
This approach excludes the possibility of fraudulent mining – any block that does not meet requirements of the Bitcoin Difficulty is not accepted.
The creation of a new Bitcoin token is somewhat like gold or silver digging − it also takes time and effort. That is why the process was called "mining".