The unique feature of bitcoin is its decentralized nature which means all the bitcoin transactions are broadcasted over the network that is peer-to-peer.
After broadcasting the transactions, these transactions are required to be verified and confirmed to make them valid or legitimate and record all the bitcoin transactions in a shared public ledger known as the blockchain.
The miners are the people that contribute to the blockchain and are involved in the entire processing of bitcoin transactions and verifying the transactions, and then they are recorded on the blockchain ledger. Learn about the bitcoin revolution by visiting https://bitcoin-champion.com.
Miners contribute to the mining process through which new bitcoins are mined, and this provides miners a reward for newly minted bitcoins in the form of transaction fees.
What is the mining process?
A network of computers is used to mine bitcoins and verify the bitcoin transactions on crypto exchanges. Obviously, as compared to individuals, computers can work faster and easier; computers are used to do the verification process of bitcoin transactions.
The difficulty level of verifying transactions keeps increasing, but the computer capability becomes sophisticated with high computing power and fast processing speed of computers.
Instead of relying on trust, bitcoin users located across the world are using proof-of-work that eliminates the need for third-parties to verify or approve the transactions.
There is a bitcoin protocol that has a set of rules that every miner or user needs to follow. In bitcoin protocol, the miners are used to add blocks of transactions in the blockchain ledger, which provides valid proof that a user uses the natural or scarce resource.
All the miners compete with each other on the bitcoin peer-to-peer network to solve the mathematical algorithms to earn bitcoin rewards. Miners are required to have or get the fastest processing power. It will result in early verification of bitcoin transactions and help miners earn newly created bitcoins.
There is only a limited time given in the bitcoin network to miners to solve the puzzles using computing power. There are approximately 10 minutes that are given to miners.
Different unique terms are used in the bitcoin protocol that a miner must know. The processing power speed to mine bitcoin is known as hash rate, whereas the processing power is known as hash power which is of hardware. There is a fixed rule for block rewards given to miners.
In the early days of bitcoin in 2009, the block reward was set as 50 BTC, set to get halved after every four years. In today’s time, in 2020, the block reward has been reduced to 6.25 BTC.
Along with receiving the block reward, there is also another source of earning for miners. Miners often charge the transaction fee from users for successfully mining a block and prioritizing their transactions on a priority basis.
This provides miners an excellent incentive for their hard work and efforts, and the block reward will continue even after the supply of bitcoin is finished.
Steps involved in Mining Process
- At first, the miners are required to verify the bitcoin transactions and check whether the transactions are valid.
- After verifying a set of bitcoin transactions, many transactions are collected together into blocks.
- Each block has its unique number, which differentiates it from other blocks. Each block is connected to its previous block to maintain the chronological order of blocks.
- Once transactions are collected and blocks and gathered, proof-of-work gets completed.
- This makes the transactions valid or legitimate, and those blocks are added into the blockchain and further into the peer-to-peer network.
What is Proof-of-Work?
Shortly, Proof-of-Work is also called PoW. Various blocks, when gathered, make a blockchain, and all blocks have a series of data or information, also known as nonces which are data strings that attach the information into blocks of the blockchain.
The computers are also known as mining rigs that do their search to find the right nonce, which can be found using random computation and is calculated using the mining rig. It is quite challenging to produce proof-of-work as it is a random process but using mining rigs can be easily produced.