• BBCA

Mining in the Bitcoin Network

Updated: Mar 1, 2019

by Alexis de Girardier

In cryptocurrency’s jargon, “mining” is the validation of transaction. As there is no central authority or central banks, the only way to gather every transaction made on a specific cryptocurrency’s network in a block is to rely on network nodesthat carry out complex mathematical computations. These nodes are called miners. Whenever a set of transactions is gathered and formed into a block, it is combined to the blockchain.

Proof-of-work and how mining makes the blockchain more secure

Because mining is a time and energy consuming activity, successful “miners” obtain new cryptocurrency or tokens as a reward. Thanks to this rewarding activity, people are incited to contribute to the computing power of the network. But, to prevent miners from building too many blocks and in turn devaluating the currency, the mathematical task required to validate and join the block is made harder and harder to conduct. This is the so-called proof-of-work. The proof-of-work is a way to secure the network to prevent from any service abuses such as spams or denial of service attacks.

The only way to solve the complex mathematical code is to make your computer calculate as many hashes as possible and wait until you find the one matching the preceding one. You may view this activity as a race in which those with the fastest and most powerful computational machine have a consequent advantage over others (because they can try more combinations at the same time). Whenever you find the right combination, the block is formed and added to the blockchain and you get a token.

In addition to this, most cryptocurrencies have a finite number of tokens that can ever be generated. For instance, Bitcoin has a finite number of blocks that will ever be built: 20,999,999.9769 (close to 21 Million). This characteristic makes mining more and more difficult and is an extra-incentive to start mining in the early stages of the cryptocurrency.