What is Bitcoin Mining?
Mining is the process of using processing capacity to process transactions, ensure network security, and keep all system participants in sync. It can be considered as the Bitcoin data center except that it was designed to be totally decentralized, with miners in all countries and none in particular having control over the network. This process is called “mining” in an analogy to gold mining because it is a temporary mechanism used in the issuance of new bitcoins.
But unlike gold mining, Bitcoin’s mining provides a reward in return for essential services to operate a secure payment network. Mining will still be required after the last Bitcoin is issued.
Does bitcoin mining work?
Anyone can become a Bitcoin miner by running software with specialized hardware. Mining Software hears transactions passed through the peer-to-peer network and performs appropriate tasks to process and confirm these transactions. Miners from Bitcoin do this work because they can earn transaction fees paid by users for faster transaction processing, and new bitcoins are issued according to an existing fixed formula internally.
For new transactions to be confirmed, they must be included in a block together with a mathematical proof of work. Such proofs are very difficult to generate because there is no way to create them except by attempting to realize billions of calculations per second. This requires miners to perform such calculations before their blocks are accepted by the network and before being rewarded. As more people begin to mine, the difficulty of finding new valid blocks is automatically increased to ensure that the average time to find a block remains equal to 10 minutes. As a result, mining is a highly competitive business where no individual miner can control what is included in the block chain.
The work test is also designed to rely on the previous block to force a chronological block block order. This makes it exponentially difficult to roll back past operations, as this requires recalculation of the job tests from all subsequent blocks. When two blocks meet at the same time, the miners work on the first block they receive and display the longest chain of blocks as soon as the next block is found. This allows mining to ensure and maintain a global consensus based on processing power.
Miner’s of Bitcoin are not able to deceive, increasing their own reward, nor to process fraudulent transactions that could corrupt the network Bitcoin, because all Bitcoin nodes would reject any block that contain invalid data according to the rules of Bitcoin protocol. Consequently, the network remains secure, even though not all Bitcoin miners can be trusted.
Is Mining of Bitcoin is not a waste of energy?
Spending energy to protect and operate a payment system is hardly a waste. Like any other payment service, the use of Bitcoin implies processing costs. Services required for the operation of the currently widespread monetary systems, such as banks, credit cards and armored vehicles, also use a lot of energy. Although unlike Bitcoin, its total energy consumption is not transparent and can not be so easily measured.
Bitcoin’s mining is designed to become more optimized over time with specialized hardware that consumes less energy, and mining operating costs must continue to be proportional to demand. When Bitcoin mining becomes very competitive and less profitable some miners choose to stop their activities. In addition, all energy spent in mining is eventually converted to heat, and the most profitable miners will be those who put that heat down for good use. An optimized and efficient mining network is one that is not actually consuming any extra energy. While this is ideal, mining economies are commensurate with what miners individually strive towards.
How does mining help keep Bitcoin safe?
Mining creates the equivalent of a competitive lottery that makes it very difficult for anyone to consecutively add new blocks of transactions in the block chain. This protects the net neutrality, preventing any individual from gaining the power to block certain transactions. This also prevents any individual from replacing parts of the block chain to reverse their own spending, which could be used to defraud other users. Mining makes it exponentially more difficult to reverse a past transaction, requiring you to change all blocks following this transaction.
What do I need to start mining?
In the early days of Bitcoin, anyone could find new blocks using the CPU of their computer. As more and more people began to mine, the difficulty in finding new blocks has gradually grown to the point where only highly cost-effective specialized mining hardware is used today. You can visit genesis-mining.com for more information.