What Is Bitcoin Mining? Cryptocurrency Mining Explained
In short, by Bitcoin mining, or any proof-of-work cryptocurrency mining, you are helping to participate in consensus and finding the next block.
Basically, one is supplying the computer power to solve a math puzzle for verification, thus adding a new block to the blockchain.
Let’s dive into what mining really is.
What is Cryptocurrency and Bitcoin Mining?
Mining Bitcoin is the way that Bitcoin stays decentralized and verified in every way possible.
Now, why is it called cryptocurrency mining?
When someone finds the nonce (read proof-of-work for more) they find the key to a solution.
This allows someone to find and create the next block.
Creating the block helps someone write a block reward for themselves.
Meaning, cryptocurrency mining is similar to mining gold - you are finding and gathering either Bitcoin or Ether (or any other proof-of-work protocol).
What Are Blocks, Block Heights, and Block Rewards?
In the blockchain, there is the memory of each ledger.
The ledgers are stored in blocks which have a certain amount of memory.
Each block in Bitcoin is 1mb, in Dash it is 2mb and so on….
Now sometimes blocks are fixed (to prevent malicious intent) and sometimes block sizes are malleable.
Block rewards are the amount of reward that someone gets for finding a nonce and starting a block.
The difficulty and rewards change over time where for Litecoin it is 25 litecoins a block.
Block height is the number of the block or its origin.
That means that each block has a certain number and a certain length that puts it above, or below the newest formed block.
What Hardware Does Someone Need To Mine Cryptocurrency?
For Bitcoin, you need to have a ASIC GPU in order to mine.
This can be a bit tedious and can also be a reason that a majority of people hold the Bitcoin mining power.
Now for a coin like Ethereum or any of the other Proof-Of-Work currency, it can drastically differ.
Ethereum is also highly specialized hardware and many others do that too.
What is Cryptocurrency Mining For?
Mining cryptocurrency has a few different beneficial features.
Decentralizing the Network
By Bitcoin mining, miners help to decentralize the ability to verify and solidify the network.
Blockchain Mining is a verification process, one which helps make sure transactions are valid.
It's why the blockchain is what it is.
And by having different nodes around the world, mining can be decentralized, open, free, and peer-to-peer.
Protecting The Network or Blockchain
By mining cryptocurrency and having rigs throughout the world, miners are also protecting the network.
Scattering the verification and network helps keep the network protected.
As long as there are two computers communicating back and forth then the network continues to run.
This makes it almost impossible to knock out the network, commander, or control the verification process.
This also protects the network from a DDOS attack because the person with the main chain, the leader that is followed, is unpredictable making it almost impossible to attack the leader.
A Backlog To Check The Blockchain
Each node running the client to mine cryptocurrency has to do one thing.
Download the whole network.
That means that each node has a backlog of the whole blockchain.
By having this, it protects the sanctity of the network and always has 1000s of backlogs to call and draw from, making the strongest chain, the strongest chain.
Why Mining Is The Perfect Incentive Structure For Honesty
Cryptocurrency mining was also created for an incentive of honesty.
As we talked about above, by cryptocurrency mining you can “create” or get more Bitcoin and Ethereum (or whatever currency you are mining).
Now the way this works is by having the miner dedicate a node and energy to the system.
That, in turn, allows miners to verify transactions.
Now by making this energy expenditure part of the situation, making the nonce found randomly and an incentive in the form of the currency - you bulletproof the system.
You give the currency an actual backing.
That would be the energy.
By making it cost energy to make the money back, and then some, you help the network stay honest and online.
(You wouldn't want to waste money/energy trying to mine a malicious block or something that goes against the protocol).
What About a 51% Attack?
That is one of the biggest counterpoints.
What if 51% of miners turn against the main blockchain and then try to change the backlog of stored ledgers?
Which is where the energy expenditure just talked about comes in...
In order to do this, you have to supply all previously used energy for mined blocked and then even more.
Although, you can read the full article on this at this link (51% Attack).
Thanks for reading,
The GCA Team