In technical terms, cryptocurrency mining is a transactional process that involves the use of computers and cryptographic processes to solve complex functions for recording data in a line of calculations. To this end, data is validated in blocks and transaction records are added to a public register known as the blockchain. Sounds like complicated stuff fit for Wall Street, right? Well, no worries, it is simple enough for even us normal folk to understand!
Miners or nodes in the network collect transactions and organize them in blocks. Think of putting a building set together, you move step by step, piece by piece, until you’ve built up the entire kit – in this case, a full blockchain.
When transactions are made, network nodes receive them and check their validity, a lot like when you make a purchase on your credit card. There is action on your account, the system checks to make sure enough credit is available, and if there is, you are able to finish the process and buy the item in question.
Bitcoin miners use their resources (hardware and electricity) to verify these transactions. Every time a block is mined a new Bitcoin is created on the network, and the miners are paid a reward for their work, just like an old fashioned gold miner.
Miners working on both sides of the blockchain (the so-called shared chain) excavate with little difficulty, with a block divided every 30 seconds. These shares are awarded to the members of the mining pool who provide valid partial proof of work.
The miners eventually produce a certificate of the block, which contains our specific transaction request. Miners send the finished block, including certificate and checksum, and claim the new piece to start again, having been rewarded.
If a miner verifies bitcoin transactions worth 1MB (megabytes), known as a block, he is entitled to a reward. The 1 MB limit was set by Satoshi Nakamoto, the pseudonym of Bitcoin’s creators, and is controversial because some miners believe that the size of the block should be increased to accommodate more data which would mean that the Bitcoin network could process and verify transactions faster.
The total supply limit is 21 million bitcoins, but only 17-18 million bitcoins have been mined, leaving only 3-4 million left
The main attraction for many is the prospect of being rewarded with Bitcoin. Bitcoin miners receive Bitcoin as a reward for complete blocks of verified transactions that add up to Bitcoin. Mining bonuses are paid to miners who find solutions to complex hash puzzles, and the likelihood that a participant is the one who discovers the solution to a complex hash puzzle is related to the share of total mining performance that Bitcoin has. Remember, Bitcoins have floated around a price of $52 thousand dollars for just one. That’s a chunk of change!
On the reverse, to encrypt a block, miners solve a cryptographic puzzle (guesswork and verification methods) to find the correct cryptographic hash of the block. A hash is generated by combining header data from previous blockchain blocks with a nonce. In crypto mining, the hash of each block in the blockchain is added along with the number of miners who have solved the puzzle.
Once a miner secures a block, it is added to the blockchain and verified in a process known as consensus by other nodes (computers) in the network. If a miner successfully verifies and secures the block, he or she will be rewarded with the creation of coins.
That’s really all there is to it! “Miners” dedicate their computers for “mining” power in exchange for a reward once they’ve put in enough effort.