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Mining is a record-keeping service done through the use of computer processing power. Miners keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block, which is then broadcast to the network and verified by recipient nodes according to Wikipedia.
What is Bitcoin Mining?
The process of adding transaction records to Bitcoin’s public ledger of past transactions or blockchain is called Bitcoin Mining. This ledger of past transactions is called the blockchain as it is a chain of blocks. The blockchain serves to confirm transactions to the rest of the network as having taken place.
Mining requires a massive effort translated into an enormous amount of computation using systems similar to data centers. Application-specific integrated circuit (ASIC) computers ate employed to provide computational power to miners, who compete to be the first to append the next block to the blockchain, issuing new coins and making the cryptocurrency’s network trustworthy.
Mining creates trust by ensuring that transactions are confirmed only when enough computational power has been committed to the block that is generated in them. The more blocks are generated in the chain, the more trust is created.
Miners add a variable amount of transactions that are bundled in a block. There’s no set number of transactions included in a block because it depends on their stored data so that each block can contain from one single transaction to several thousand. The amount of bitcoin to be issued is fixed and diminishes with time through the halving event occurring every four years.
Why Mine Bitcoin?
Just like gold or any other mineral requires hard physical work to be mined hard and entered into circulation, Bitcoin requires hard computational work to be issued. This computational effort is a necessary step to ensure its security.
Being digital data in the timing chain, Bitcoin is exposed to copying, counterfeiting, and double-spending. The computational hard work required to mine Bitcoin is so costly and resource-intensive that malicious actors have a better incentive t spend such resources to mine Bitcoin rather than trying to compromise it.
Moreover, mining is the necessary process required o issue new bitcoin. If mining ceased, there would still be millions of bitcoin in circulation, and the network would still be functioning. However, the financial incentive rewarded to miners enables fulfilling a system that would otherwise appear as an unfinished business.
FROM CPU TO ASIC MINING
The Bitcoin network’s hardware experienced rapid technological evolution in only ten years. The mining equipment required to generate new bitcoin and new transactions on the blockchain plays a fundamental role in the network’s success because it determines whether or not it is profitable for miners to run such a business.
In the early life of Bitcoin, node operators and miners performed very similar operations using similar hardware called central processing units(CPUs). The genesis block was almost certainly mined by a computer using its CPU.
CPUs control how computer commands are processed and executed, and due to the lack f miners’ competition during the early days, the little computational power required to create new blocks and earn mining rewards could easily be performed on CPU devices.
Once bitcoin started to gain value in 2011, hitting $1 first and then $30 per coin, competition to mine bitcoin became more intense, and graphics processing unit (GPU) mining was adopted. Initially built for gaming applications, GPUs are designed for doing many mathematical calculations simultaneously and are much faster than CPUs.
In 2012, field programmable gate arrays (FPGA), an intermediate step between a fast programmable processor and a dedicated ASIC, were used until ASICs emerged and dominated bitcoin mining until now.
Application-specific integrated circuits (ASICs) started being used in 2013 for bitcoin mining. They are custom-built for a particular application, and in Bitcoin, these chips are customized only to perform ha-256 Hashing. They are orders of magnitude faster than GPUs. Today, ASIC is the only economically feasible bitcoin mining technique.
THE MINING PROCESS
Mining consists of the following steps, which are performed in a continuous loop:
- Picking and bundling transactions that were broadcast on the peer-to-peer network into a block.
- Selecting the most recent block on the longest path in the blockchain and inserting a hash of its header into the new block;
- 3. Trying to solve the proof of Work(PoW) problem for the new block and simultaneously watching for new blocks coming from other nodes.
The new blocks are added to the local blockchain and broadcast to the peer-to-peer network if a solution is found to the proof of work problem
THE PROOF-OF-PROOF WORK PROBLEM
Proof of work is the core of the Bitcoin network. Without participants could modify the blockchain to their benefit. Without a centralized authority to resolve disputes, PoW guarantees that the network continues to function correctly.
The proof of work mechanism fulfills two purposes: it ensures the same copy of the blockchain and that funds are not spent more than once, a known issue for payment network central coordinating entities.
Bitcoin’s PoW algorithm adopts a hash function, -a way mathematical operation that transforms a string of data into a fixed-length number called a hash. Even the minor change to the data, like a comma, results in the complete modification of the hash.
Bitcoin relies on SHA-256, which outputs a value that is 256 bits long and was created by the National security Agency in 2001 for this reason, it is also considered very secure. Miners search for acceptable blocks typically using the following procedure performed continuously:
THE DIFFICULTY ADJUSTMENT FEATURE
Bitcoin’s adjustment and reward halving are the foundation of Bitcoin’s programmatic supply system. On average, the Bitcoin network is designed to create one block every ten minutes. Satoshi specifically chose this feature as a tradeoff between fast confirmation time and the amount of work wasted due to chain splits and invalid blocks.
As more miners join, the rate of block creation will go up, as the rate of block creation goes up, the mining difficulty rises to compensate, pushing the block creation rate down to its designed 10-minute average.
In practice, for every 2016 block (typically generated every two weeks with each block node calculate a new difficulty accordingly, based on the time it took to mine the last 2016 blocks.
The genesis block only had a difficulty of 1, which means it was likely mined instantly. Comparatively, the block mining difficulty is now at 30 trillion and growing. This measure indicates that ASICS mining hardware performs, on average, over 30 trillion hashes before finding a valid block to remain competitive.