Bitcoin Mining: A Closer Look Under the Hood
Bitcoin mining is an integral part of the cryptocurrency’s infrastructure. The operation helps process transactions, creates new bitcoins and submits the validated transactions to the publicized and immutable distributed ledger. Currently, the network’s hashrate is running at a phenomenal 3,418,031,852 GH/s, strengthening the bitcoin architecture more so each and every day. But many newcomers hearing […]
Bitcoin mining is an integral part of the cryptocurrency’s infrastructure. The operation helps process transactions, creates new bitcoins and submits the validated transactions to the publicized and immutable distributed ledger.
Currently, the network’s hashrate is running at a phenomenal 3,418,031,852 GH/s, strengthening the bitcoin architecture more so each and every day. But many newcomers hearing about bitcoin for the first time wonder, How does bitcoin mining actually work?
Bitcoin Mining: How it Works
Bitcoin mining requires the use of a specialized mining computer and software to solve mathematical equations. Miners consist of individuals or organizations running this software who compete with each other to solve these puzzles.
When people transact with bitcoin, all of the network’s nodes share information about new transactions in a transaction queue called a mempool. Blocks of transactions are not accepted into a blockchain’s ledger until miners perform a hash function solving the puzzle, which in turn verifies the legitimacy of transactions contained in that specific block. This means miners can try and mine blocks of transactions by hashing (attempting to solve the equation) from a string of numbers and letters.
A miner solves the problem with another string of random digits by computing a lucky hash result which is followed by a reward of 12.5 bitcoins and all the transaction fees as well. Hashing requires significant processing time and resources to solve these problems. Deciphering the cryptography in a hash function is not easy and requires brute computational force. All of the miners simultaneously trying to solve these problems create the network’s hashrate. Once a puzzle is solved by the miner the result is called proof-of-work.
The mathematical puzzles solved are impossible to predict without overcoming the difficulty of finding a particular hash value. Mining rigs or devices that mine bitcoins continuously try and solve these puzzles over and over until miners get the correct answer.
The process not only incentivizes miners monetarily, but also ensures transactions are validated correctly. Every block also hosts the hash of the previous block mined before it. This, in turn, makes sure the system maintains an accurate chain of information which essentially becomes tamper resistant.
- Bitcoin transactions are sent to nodes.
- Every node has a separate transaction queue called a mempool.
- Nodes relay the information. Some nodes can mine using specialized devices, ASIC chips and mining software, to solve equations while trying to find a block.
- Solving these puzzles means miners are given a string of alphanumeric digits and they have to hash the string of digits with another random string that begins with multiple zeros.
- Miners use lots of processing power trying to mathematically link (solve the equation) the strings of digits. Mining devices continuously hash (attempt to solve) these puzzles until a block is found.
- If successful at hashing a puzzle, miners are currently rewarded 12.5 BTC. Every four years the reward halves.
Bitcoin mining can be hard to understand when you’re first introduced to the digital currency. But, once you get a grasp of the concept, it’s not so hard to understand the symbiotic relationship of mining and securing the network.
A more in-depth look at how mining works can be found here at our Bitcoin.com Wiki page.
What do you think about the process of bitcoin mining? Let us know your thoughts in the questions below.
Images courtesy of Shutterstock, and Bitcoin.com.
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