How does Bitcoin mining work?

Bitcoin mining is a process that provides processing power to process, secure and synchronize all users on the network. The Mining is a kind of decentralized Bitcoin data center with miners from all over the world. This process is called mining analogous to gold mining. Unlike gold mining, bitcoin mining offers a reward for useful services. The payment of the respective Bitcoin shares depends on the available computing capacity.

In traditional Fiat currency systems, governments and central banks spend more and more money when needed. With Bitcoin, however, no money is printed. Rather, Bitcoin is mined itself or in the cloud (cloud mining). Around the globe, computer bitcoins mince (compute) and compete with each other.

Around the clock, people are transferring Bitcoins over the Bitcoin network. The Bitcoin network handles these transactions by collecting all the transactions of a given period and putting them together in a list – the so-called block. It is the job of the miner or screamer to confirm these transactions and enter them in an account book. He is rewarded for this in Bitcoin (the Bitcoin transaction fee).

Create a hash

The account book is a long list of all the blocks. It is also called Blockchain accordingly. The blockchain is used in bitcoin mining to track all transactions at all times. Whenever a new block is created, it is added to the blockchain. This results in a seemingly endless list of all transactions ever made. The blockchain is visible to everyone. Accordingly, each user can see which transaction is being performed.

On the other hand, it is not clear who will carry out this transaction. Thus Bitcoin is transparent and (pseudo-) anonymous at the same time.How to make sure the blockchain stays intact and never gets manipulated? At this point, the miners come into play. When a block of transactions has been generated, miners let this block go through a process. They take the information and apply a mathematical formula that transforms the transaction into something much shorter, actually just a string of letters and numbers. This is also called hash. This hash is kept in the block at the end of the blockchain.Hashes have some interesting features. It’s pretty easy to make a hash from the information in the bitcoin block, but it’s almost impossible to see what the hash was before. It should also be noted that each hash is unique: if even one character in the block is changed, the entire hash changes.

To create a hash, the miners not only use the data of the transaction in the block, but also other additional data. Part of the data is the hash in the last block of the blockchain.Since each hash of a block uses the hash of the previous block, it creates a kind of wax seal. He confirms that the current block and the previous one are valid.

If someone tried to manipulate a transaction by changing the block that is already in the blockchain, that one would have to change the hash as well. If someone checks the authenticity of the block with the hashing function, one would notice directly that the hash does not match that in the blockchain. The block would be unmasked immediately as a fake.