How Bitcoin Mining Works

When it comes to traditional, physical currency, the government will always print out more than they need to. Bitcoin is a non-physical type of money that exists in the virtual world so the government does not print it all. It is obtained on the computer through a transaction involving buying and trading bitcoins. There are many of these transactions every day. More all the time. All of these transactions records this mind-boggling maze of transactions and sorts them into what are known as bitcoin blocks. 

The list of blocks in a given day is called a blockchain. These blocks are constantly updated throughout the day as new transactions take place. These updated lists are given to users who need them to be accurate. Hence, there are what is called bitcoin mining. Miners check these blocks to ensure their accuracy. Miners do this by applying a mathematical formula to the data in a block. Sometimes a miner will be required to try a bunch of different nonces before one is finally accepted by the system. This procedure produces a small sequence of letters and numbers called a hash, which is then stored with each blockchain.

Each hash is unique, adopting its form based entirely on the data. However, it’s almost impossible to tell a block’s information just by looking at the hash. The data used to form a hash does not involve any of the data created by transactions. That is why the hash won’t change when further transactions are made during the rest of the day. The hash tells the user that the block is accurate and therefore good for use.

After a hash is originally formed it is recorded. This recording is because to give themselves an advantage some fraudsters are able to go in and change the block. This will change the hash. However, since the original, authentic hash was already recorded, it will be recognized right away that the changed, unrecorded hash is a fake and therefore the block a fake.

Miners compete with each other to create and seal off their own blocks by creating hashes for as many as possible for anyone else. They are motivated to do so because they are rewarded with bitcoin every time they create a successful, legitimate hash. It would normally be extremely easy to do bitcoin mining work. If it remained this way, there would be so many people getting so many bitcoins that there would very soon be no more bitcoins left to obtain. That is why the network has made it much harder to form hashes.

They do this by requiring users to go through an authentication procedure for each hash called a “Proof of Work.” At times you will be required to spend time making corrections since to make it harder they have added rules that must be followed precisely. Sometimes users will be required to input random data called nonces. And sometimes afterward a nonce to may be required to be changed. When all requirements are satisfied, you have completed successfully mining a block.