The place of cryptocurrency mining in Blockchain technology


 What is the role of cryptocurrency mining on the blockchain?

    What is the role of cryptocurrency mining on the blockchain?

    With all the excitement around Blockchain, pretty much everyone thinks it has come to transform the world. With its ability to increase openness and fairness while saving businesses time and money, technology is influencing a wide range of industries, from contract enforcement to government.

    The “block” and “chain” structure of blockchains gives them their name. Blocks are made up of several bitcoins, which are small units that contain all the data code separately. The connections that link one neighborhood block to the next are called the chain. Each blockchain represents a unique authentication code that is stored in the network software and is expressly encrypted. Learn more about blockchain …

    When using bitcoins or other cryptocurrencies, blockchain mining is a process that verifies every step of the transaction. The people involved are known as blockchain miners, and their main purpose is to confirm the movement of money from one network computer to another through a maze of computer equipment and software.

    In this article, we are going to talk about the cryptocurrency mining process in general. Whenever we talk about "mining bitcoins", we must understand, the mining of cryptocurrencies. However, token burn is the opposite of token mining.

    What is the minor?

    Who can be considered a minor? A miner can be a computer or a group of computers that perform bitcoin transactions by adding new transactions or verifying blocks created by other miners. Miners are rewarded with transaction fees.

    Mining is a process of adding transactions to the distributed ledger of existing transactions, known as a blockchain. The person involved in mining is therefore called a miner.

    Miners validate new blockchain transactions and record them on the blockchain. Miners compete to solve a difficult mathematical problem based on a cryptographic hashing algorithm.

    A miner is an actor who participates in cryptocurrency transactions. It plays a crucial role in both the creation of new cryptocurrencies and the verification of the transaction on the blockchain. It adds new blocks to the existing chain and ensures that these additions are accurate.

    However, the term bitcoin “mining” is a misnomer. When gold is mined, nothing is achieved beyond finding new gold. When bitcoins are mined, however, a valuable service is provided to the bitcoin network: decentralized recording and validation of transactions.

    How does mining work?

    Listening to transactions

    Bitcoin miners connect to the Bitcoin network like telephone operators. Miners use their computers to listen for transaction requests across the network and assemble a list of valid transactions.

    Bitcoins are not sent and received as attachments in an email. There are no files, only allocations of bitcoins made to various public addresses. Each public address has a corresponding private key and only the holder of this key is able to digitally sign a new transaction request.

    Also, the query must have input. Inputs are previous transactions that the sender uses to fund the new transaction. If you have already received five bitcoins from Alice and four from Bob, you can list these entries to fund a new transaction to Cynthia worth up to nine bitcoins.

    Miners check for two things when they hear your request. They first verify that your digital signature proves that you are the recipient of these entries. Second, they check that you haven't already spent those inputs.

    To perform this second check, miners consult a public database of all valid past transactions, called the blockchain, to see if these entries have already been used in a transaction or if they are still available. Copies of this blockchain are stored on the computers of all Bitcoin users who connect to the network.

    Thus, miners play the role of bank tellers: inspecting checks, ensuring that all signatures and appropriate account numbers are present, verifying the identity of the customer, and looking for proof that the customer has sufficient cash to finance the transaction.

    Fill a "block"

    If everything is verified, the miner will add the transaction to their personal list of all valid transactions in the last few minutes. Every few minutes, a miner will be selected to add their personal list, a block, to the official blockchain, keeping the public record up to date.

    To prevent miners from fraudulently corrupting the blockchain, the Bitcoin protocol puts miners in competition. A different miner is empowered to write each block, approximately every 10 minutes, and only valid blocks will be accepted by the rest of the mining community.

    Here's how it works:

    Guess and check the “Nonce”

    A miner's block will become part of the chain whenever a majority of the mining community agrees (A) that the transactions listed by the miner are valid and (B) that the miner has correctly guessed a special number, the nonce, which solves a particular mathematical problem.

    Miners perform this verification by examining the particular digital signature of the offered block. This signature is a computer-generated product of three inputs, (1) the signature of the predecessor block, (2) a list of valid transactions since that predecessor, and (3) a particular random number, called a nonce.

    To understand everything, we need a little more information about digital signatures. Signatures work by using “  hash ” functions. In their simplest form, hash functions are mathematical equations that take any given input and create a seemingly random output that will always match that particular input.

    Understanding Cryptocurrency Mining

    To understand bitcoin mining, you must first understand the three main concepts of the blockchain.

    Public Distributed Ledger

    A distributed ledger is a global ledger that keeps track of all transactions on the blockchain network. Bitcoin users are those who validate transactions on the network.


    Blockchain protects blocks from unwanted access by encrypting them with the SHA-256 hashing algorithm. They have a digital signature. Their hash value cannot be changed after it is created. SHA-256 accepts any input string length and returns a fixed 256-bit output. It's a one-way function, meaning you can't completely infer the inverse of the input from the output (what you generated).

    proof of work

    Miners authenticate transactions in blockchain mining by solving a difficult mathematical challenge known as proof-of-work. To do this, the main objective of the miner is to discover the nonce value, which is the mathematical problem that miners must solve in order to create a hash smaller than the network's objective for a given block.

    Types of mining

    Working using a standard desktop or PC is impractical due to the resource complexity and effort involved in the mining process. The blockchain mining process requires specialized computer equipment and software to match the required skills. Here are the types of mining one can have:

    Individual mining

    When mining is done by an individual, the individual must first register as a miner. As soon as a transaction is completed, all unique users on the blockchain network are assigned a mathematical puzzle to solve. The person who solves it first is rewarded.

    Once the response is discovered, all other miners on the blockchain network will confirm the decrypted value before adding it to the blockchain. As a result, the transaction is verified.

    Pool Mining

    A group of users collaborates to authorize a transaction in the mining pool. The complexity of the data encoded in the blocks can sometimes prevent a user from decrypting the encoded data themselves. As a result, a group of miners collaborates to find a solution. Following confirmation of the result, the prize is distributed among all users.

    cloud operation

    Computer hardware and software are no longer required for cloud mining. It's a simple way to get rid of blockages. Managing all machines, order schedules, and sales revenue is no longer a constant concern with cloud mining.

    While convenient, it comes with its own set of drawbacks. Operational functionality is limited due to Bitcoin hashing restrictions. Because incentive gains are small, operating expenses increase. Software upgrades are limited, as is the verification process.

    In summary

    We explained why mining is necessary: ​​to stop double-spending by creating a record of all transactions, the blockchain. We also learned, in simplified terms, how mining actually works.


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