BITCOIN MINING: THE ART OF DIGITAL COIN MAKING
From the rise of cryptocurrency, the word mining has adopted a completely different meaning. Once upon a time, mining was what the dwarfs did when they left Snow White at home alone, now it refers to nodes on a blockchain network competing to earn the task of processing transactions in exchange for digital rewards. Welcome to mining in the 21st century!
Essentially, the “crypto” part of cryptocurrency requires that all sensitive information associated with a transaction be encrypted. This encryption is achieved through the use of hash functions. These functions produce a random string of letters and digits called a hash, that represent some meaningful underlying information. Regardless of what is put in through a hash function, a completely unique hash will be produced. The limit is the length of the hash produced by the function.
The purpose of mining is to produce a hash for the transactions in a block, which can then be verified by the network and added to the growing chain. A potential miner will try to accomplish this by taking the transaction information that needs to be encrypted and pairing it with a special number known as a nonce. This combination is then run through a hash function. The hash that is produced must then be less than or equal to a value that has been predetermined by the network based on the difficulty of this task.
The first miner able to produce a valid hash is assigned the responsibility of generating the next block of transactions to be added to the blockchain. In exchange, they earn coins or tokens associated with the network. This is how new coins enter circulation. At this point, the rest of the network is notified to move on to the next set of transactions waiting to be encrypted and added to the distributed ledger.