Bitcoin Mining – How Does It Work - EzGuestPost

Bitcoin Mining – How Does It Work

When you receive a Bitcoin trading alerts boom or slump on your phone, your incentive to further invest, withdraw from the currency, or take similar action is heavily dependent on it, but it is not always that you think about where the Bitcoin came from in the first place.

To understand where the currency comes from it is of significance to understand how does Bitcoin mining work. There are certain elements which need to be clarified before understanding what mining is:

  • There is no regulatory authority that issues Bitcoins which are then mined; it is an automated process which refreshes itself regularly.
  • The Bitcoin does not hold any physical value and represent only the amount which is associated with it by its demand.
  • Mining requires special compilers.

So, without further ado, let us start our practice run of mining a Bitcoin.

Step 1: Transaction Verification

A Bitcoin is mined when a transaction is underway, meaning that someone is adding a transaction to the public ledger which contains all Bitcoin transactions. Then how does Bitcoin mining work here? During the process of the transaction, a series of complex codes need to be delivered in order to unlock the block and obtain the transaction data, and the miner who does that is able to mine new Bitcoins in exchange.

If the transaction is a repetitive one, meaning that it is attempting to reuse Bitcoins, the mining will not work.

Step 2: Forming A Block

When the transactional data is obtained, it is formulated into a block of data which is protected by complex encryption, meaning that the block cannot be accessed by any external party unless the hashing is decrypted. In the initial block, the transactional data is simply transferred.

Step 3: Hashing of A New Block

After the data is encoded in the block, the header of the block is attached to a new block as a hash, which means that now the new block is ready for decryption by a compiler.

Step 4: Proof of Work

How does Bitcoin mining work efficiently if anyone can easily mine his/her own? This is where proof of work comes in; it certifies the difficulties which a miner took place in coming to the ability to decrypt the hash on the block of code.

To solve the algorithm of the POW you need to put in energy (to power the compiler), time (to obtain the right transaction to mine from), and the cost of buying the compiler itself. The faster the compiler, the more expensive and energy consuming it is.

Step 5: New Entry

There will be a number of miners trying to make their own from the same transaction you are targeting. Assuming that you do become successful and your compiler is able to find the right solution for the algorithm, the block will have decoded and formed a new entry on the public ledger with your details. The coins you mined will then be on your crypto wallet and give you an alert for Bitcoin, which will be even more satisfying than a successful investment!

Bitcoin Mining – How Does It Work
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