What is Bitcoin Mining :
Bitcoin transactions are taking place day in and day out. Since these are financial transactions, the Bitcoin software requires someone to keep a record of these transactions. This is done by collecting information related to a transaction made during a specific period into a list called “block”. These transactions in a block are written in a general public ledger called “BlockChain”. Those recording such transactions are called “Miners” and they are rewarded with some Bitcoin generated from the software. This process is called “Mining” and it’s the miners’ job is to confirm those transactions are legitimate, and write them into a general ledger.
Bitcoin Mining is therefore process of recording legitimate bitcoin transactions into Bitcoin’s public ledger or “blockchain”.
How does Bitcoin Mining works ?
Each time a block gets completed, a new block is generated. There is a countless number of such blocks in the blockchain. Does that mean the blocks are randomly placed in a blockchain? No, they are linked to each other (like a chain) in proper linear, chronological order with every block containing a hash of the previous block.
Now what is a hash ?
When a block of transactions is created, miners put it through a process. They take the information in the block, and apply a mathematical formula to it, turning it into a far shorter, seemingly random sequence of letters and numbers known as a hash. This hash is stored along with the block, at the end of the blockchain at that point in time.
Hashes have some interesting properties. It’s easy to produce a hash from a collection of data like a bitcoin block, but it’s practically impossible to work out what the data was just by looking at the hash. And while it is very easy to produce a hash from a large amount of data, each hash is unique. If you change just one character in a bitcoin block, its hash will change completely.
Miners don’t just use the transactions in a block to generate a hash. Some other pieces of data are used too. One of these pieces of data is the hash of the last block stored in the blockchain.
Because each block’s hash is produced using the hash of the block before it, it becomes a digitally connected chain. It confirms that this block – and every block after it – is legitimate, because if you tampered with it, everyone would know.
Because each block’s hash is used to help produce the hash of the next block in the chain, tampering with a block would also make the subsequent block’s hash wrong too. That would continue all the way down the chain, throwing everything out of whack. Hence these hashes help in assuring recording of legitimate transactions in blockchain.
Reward of Bitcoin Mining :
Every time someone successfully creates a hash, they get a reward of 25 bitcoins, the blockchain is updated, and everyone on the network hears about it. That’s the reward to keep mining, and keep the transactions working.