When we talk about Bitcoin mining it usually refers to the process of verifying transactions which are added to public ledgers or block chains. It also deals with the process by which the release of Bitcoin is monitored. In the mining process the recent transactions as recorded by Blockchain and saved as blocks are compiled and it is akin to solving a puzzle that is computationally difficult.
What is involved in Bitcoin mining?
This is a difficult and resource intensive process which allows miners to find a steady number of blocks every day. Individual blocks are considered valid when they contain a certain proof of work. This is in turn verified by different Bitcoin nodes every time they work on a block. The Hashcash mode of proof of work is used by Bitcoin. The primary need to mine is to reach a tamper resistant and secure consensus of the Bitcoin nodes. Mining is also a way of introducing more Bitcoins into the crypto currency system. The miners usually pay transaction fees as well as subsidy in the form of newly created Bitcoins. This helps to disseminate the new coins in a manner that is decentralized and it also motivates people to ensure security of the system. Bitcoin mining is akin to how other commodities are mined; exertion is required as well as making the currency available at rates that are akin to how commodities like gold are obtained from ground mines.
Proof of work is data that showcases how time consuming and costly it was to satisfy a certain set of requirements. The process of producing proof of work is random and usually has low probability; there are several trials as well as errors that are encountered in order to produce proof of work that is valid. Hashcash proof of work is usually used by Bitcoin.
Difficulty in the mining of blocks exists as every block’s header includes SHA-256 hash which needs to be equal to or lower than the target set for a block to be taken into a network. For instance, there is a certain number of zeros that hash of a block usually includes. As the probability that a hash would have several zeros at the beginning is low, several attempts need to be made. A nonce is added every time for a new hash to be generated in every round.
There is a metric that measures the Bitcoin network difficulty. This measures the level of difficulty in finding a new block compared to the easiest level. The rate of recalculation is every 2016 blocks that are generated as per the difficulty that one would have faced generating 2016 blocks two previous weeks before. This usually yields a rate of one block being generated every ten minutes. The rate of block creation goes up with more miners joining the network. The rate of difficulty goes up in block generation in order to compensate the rate at which blocks are created which needs to stay down. Often malicious miners try to release new blocks in the network, but these are usually not as per the set difficulty target which is why they are rejected by the miners on the network.