Proof-of-work-mechanism
The companies and/or individuals who work with this equipment, the miners, use their means to create new 'blocks' in which transactions are stored. As a reward they get new bitcoins ( subsidy fee ). Unlike traditional mines, with Bitcoin Mining Special Computers verify the transactions on the Bitcoin blockchain. This is done via the SHA-256 Hashingalgorithm, an encryption method developed by the NSA, which is crucial for securing the transactions.
Worldwide, miners are running hundreds of thousands of computers ( nodes ) that together produce hundreds of billions of these encryptions ( hashes ). A transaction is only confirmed if a miner finds correct encryption, creating a new 'block'. If a miner finds such a new block that is accepted by the entire network, he will receive new bitcoins (the subsidy fee ). This reward goes together with adding the waiting transactions to the new block on the blockchain.
Miners spend electricity, time and other means on the mining of bitcoins. This proof-of-work mechanism protects the network and increases the value of Bitcoin. Due to the large number of miners and the amount of energy that the mining process requires, it is virtually impossible to successfully attack the Bitcoin network.
What exactly do bitcoin miners do?
Confirm transactions
Bitcoin Miners play an essential role in confirming and validating transactions. As soon as a miner produces a hash from a candidate block that lies under the current goal, a new block is found and added to the chain of existing blocks (the blockchain). When Bitcoin is sent from one address to another, a transaction is created that is broadcast to the entire network and wait for confirmation. "Failure" transactions remain in a so -called mempool . When a new block is found, as many transactions as possible are placed in the block, after which the new block is accepted nodes
The blocks in the Bitcoin Blokchain have a limited capacity, which means that only a certain number of transactions can be confirmed per block. Each subsequent and added block to the blockchain is an additional confirmation of these transactions. Most stock markets and services that accept Bitcoin usually require up to 6 confirmations before they consider a bitcoin transaction as "definitively".
Secure the network
Bitcoin Miners protect the network by carrying out proof-of-work, which makes it expensive and impractical for an attacker to change or change previous transactions. The energy that miners spend on finding new blocks is measured via the hash rate (speed). The Hash Rate is therefore also a measure of how safe the Bitcoin network is at any given moment. The development of the Bitcoin Hash Rate is shown in the graph below. This is at a record height, so the protection of the Bitcoin network has never been so good.
Bring new bitcoins into circulation
Bitcoin Miners put new bitcoins in circulation as a reward for creating new blocks. One of Bitcoin's best characteristics is his regular monetary policy, which is directly related to Mining; Mining is the process through which new bitcoins are released. At any time it is known exactly how many bitcoins have been created and how much bitcoins still have to be created until everything has been published. In total, just under 21 million bitcoins will be put into circulation.
Bitcoin is designed to be released at a predictable pace. For every 210,000 blocks, the reward for finding a new block is halved. The first set of 210,000 blocks gave the miner of a block 50 BTC; The next set gave 25 BTC per block; And the current set of 210,000 blocks rewards miners with 6.25 BTC per block. At the time of writing we are on the eve of another halving. See below the inflation schedule of the issue process. For more information about the Bitcoin Halving, read the following article: click here .
What are Bitcoin Mining Pools?
Bitcoin Mining Pools are partnerships of miners who bundle their computing power to increase their chances to resolve the mathematical puzzle. The rewards for the block are proportionally distributed on the basis of the amount of computing power that has been supplied to the pool. Participating in a Mining Pool helps individual miners to receive more consistent payouts in a competitive environment.
The Bitcoin Network strives to find a new block about every 10 minutes, which means that one happy miner receives a reward over a reasonably consistent period. It is not difficult to imagine that a certain miner can wait a long time before he finds a new block, if that ever happens. This is why Miningpools originated. Mining Pools combine the computing power of many miners and distribute the rewards that these miners earn evenly, based on the amount of resources that each miner has contributed. One of the most advantageous characteristics of MiningPools is the more reliable income flow they offer.
This article was compiled by the BitStaeteInvestment Team. If you want to know more about the professional investing in Digital Assets, please contact us.
