Mining is a process of increasing the Bitcoin money supply. Mining also protects the security of the Bitcoin system, prevents fraudulent transactions, and avoids “double spending”, which refers to spending the same Bitcoin multiple times.
Miners provide algorithms for the Bitcoin network in exchange for the chance to earn Bitcoin rewards. Miners verify each new transaction and record them on the general ledger. A new block is “mined” every 10 minutes.
Each block contains all the transactions that occurred from the previous block to the present, and these transactions are added to the blockchain in turn. We call a transaction that is included in a block and added to the blockchain a “confirmed” transaction. After the transaction is “confirmed”, the new owner can spend the bitcoins he received in the transaction.
Mining Income Mechanism
Miners receive two types of rewards during the mining process: new coins for creating new blocks, and transaction fees for the transactions included in the block.
To get these rewards, miners scramble to complete a mathematical puzzle based on a cryptographic hash algorithm, that is, the calculation of the hash algorithm using a Bitcoin mining machine.
The hash algorithm requires strong computing power, the number of calculation processes, and the quality of the calculation results are used as the proof of the miner’s computational workload, which is called “workload proof”.
The competition mechanism of the algorithm and the mechanism by which the winner has the right to record transactions on the blockchain both keep Bitcoin safe.
Miners also receive transaction fees. Each transaction may contain a transaction fee, which is the difference between the inputs and outputs recorded by each transaction.
Miners who successfully “mined” a new block during the mining process get a “tip” for all transactions contained in that block. As mining rewards decrease and the number of transactions included in each block increases, transaction fees will gradually increase as a proportion of miners’ earnings. After 2140, all miner earnings will consist of transaction fees.
Advantages of Mining
Mining is a process of decentralizing settlements, each of which verifies and settles processed transactions.
Mining protects the security of the Bitcoin system and enables the entire Bitcoin network to reach consensus without a central authority.
The invention of mining that makes Bitcoin special, this decentralized security mechanism is the basis of peer-to-peer electronic money.
Rewards and transaction fees for minting new coins are an incentive mechanism that regulates miner behavior and network security while completing the currency issuance of Bitcoin.
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