fbpx Skip to content

Knowledge Byte: Exploring Blockchain Mining

Photo

Paulo Guimarães

Blockchain-111

There are some special nodes in the network that verify the transactions and maintain the ledger. We call them “miners”. Using the state of art cryptographic algorithm, miners validate the transactions across the network.

In order to maintain the monetary system, the miner must be able to confirm that:

  • The originator of the transaction possesses the fund being transferred
  • The originator of the transaction has obtained the funds by one of the means commonly recognized as valid

A transaction does not become a part of the blockchain until it is verified and included in a block by a process called mining. The Bitcoin system of trust is based on computation. Transactions are bundled into blocks, which require an enormous amount of computation to prove, but only a small amount of computation to verify as proven.

The mining process serves two purposes in Bitcoin:

  • Mining nodes validate all transactions by reference to Bitcoin’s consensus rules. Therefore, mining provides security for Bitcoin transactions by rejecting invalid or malformed transactions.
  • Mining creates new Bitcoin in each block, almost like a central bank printing new money. The amount of Bitcoin created per block is limited and diminishes with time, following a fixed issuance schedule.

Mining achieves a fine balance between cost and reward. It uses electricity to solve a mathematical problem which means more complex the mathematical algorithm is, it would take higher computing power thereby consuming more electricity. A successful miner will collect a reward in the form of new Bitcoin and transaction fees. However, the reward will only be collected if the miner has correctly validated all the transactions to the satisfaction of the rules of consensus. This delicate balance provides security for Bitcoin without a central authority.

Adapted from this source.

Related products to help you upskill

Never miss an interesting article

Get our latest news, tutorials, guides, tips & deals delivered to your inbox.

Please enter your name.
Please enter a valid email address.
Please check the required field.
Something went wrong. Please check your entries and try again.

Keep learning

Blockchain-222

Knowledge Byte: 4 Steps to Create and Implement Blockchain

According to a study by Deloitte, 92% of the 26,000 blockchain-based projects that have been created between 2016 and 2018 are now dead. It is...
Blockchain-444

Knowledge Byte: Understanding Blockchain 101

Despite its increasing popularity and demand, it's far from easy to understand what Blockchain actually entails to those who are entirely new to it. Understanding...
Blockchain-333

Knowledge Byte: The Real Benefits of Blockchain

Looking for a succinct yet comprehensive list of benefits of blockchain? Look no further. Blockchain provides the following benefits: Transparency: In blockchain, all network participants...
Scroll To Top
Tweet
Share
Share