Bitcoin is the largest cryptocurrency by market capitalization and adding more to the existing circulation is called Bitcoin Mining. Interestingly, mining also refers to the process of recording Bitcoin transactions on the blockchain, which is a digital ledger.
What is the Bitcoin Network?
The Bitcoin network is a decentralized global public ledger with a massive list of timestamped transactions. Every ten minutes, the ledger is updated by adding “blocks” containing a list of new transactions. The existence of the ledger, which is freely maintained by thousands of people known as nodes, allows anyone to see both the current state of Bitcoin ownership and its entire history.
Why “mine” Bitcoin?
Bitcoin mining is an important part of the network’s method of gaining consensus on the current state of the ledger. There is no central authority that decides whether or not transactions should be structured to fit into new blocks. Rather, the state of the ledger is established cooperatively and through coordination between nodes, in accordance with the Bitcoin protocol.
The majority of nodes simply check the validity of transactions, store the ledger, and notify other nodes of changes. On the other hand, a subset of nodes called miners compete with each other to create new blocks. Miners fundamentally change the state of the ledger, who owns what, when they generate new blocks.
Who can mine Bitcoin?
Only miners who have completed proof of work are eligible to add a new block. From ledger updates, miners can suggest new blocks.
How is a new transaction added?
Bitcoin miners select legitimate or invalid transactions from a pool of potential transactions broadcast to the network by nodes. These transactions are recorded in a “memepool”.
The first miner to complete the proof of work broadcasts their new proposed block to the larger network of nodes, which then validates that the block meets the protocol requirements.
However, it is possible (and usually happens) for a large number of miners to complete the proof of work almost at the same time and simultaneously publish their new block to the network. Additionally, due to network delays and geographic dispersion, nodes may receive new blocks offered at somewhat different times.
Power consumption issues
For most of Bitcoin’s brief existence, mining has been an energy-intensive activity. The high energy costs of bitcoin mining have caught the attention of climate change activists, who blame the practice for increasing emissions.
Bitcoin mining, by some estimates, consumes the same amount of electricity as entire countries. This is one of the reasons why many crypto experts and influencers are pushing for Bitcoin to move from proof-of-work consensus to proof-of-state consensus mechanism.
Also Read: What is Blockchain? How is it used in cryptocurrency? – BusinessToday
Also Read: What is Bitcoin? How it works? Find out here – BusinessToday