By Lumai Mubanga. firstname.lastname@example.org
Traditionally, fiat money is printed, and sanctioned by individual national central banks. Each bank determines how much cash to print and push into circulation. This has its own advantages and disadvantages. Issues of inflation or deflation are handled at that level. What about Bitcoins?
Bitcoins are not owned by any country or central bank. They are digital and decentralized currency. In the absence of a central authority and its potential to permeate worldwide acceptance, how is such a currency produced, distributed, and controlled? The answer lies in Mining.
If you decide to join the family of bitcoin miners as opposed to mere users, you may be interested in knowing that, those who join the mining operations have profit motives. They also play a vital supportive role in the ecosystem. They devote their time and investments in making sure that, the principles behind the creation of autonomous currencies are sustained far into the unforeseeable future.
The mining of bitcoins is therefore, simply divided into four basic steps. These include downloading of the entire block chain copy, verification of transactions, creation of blocks using given transactions and necessary metadata and finally, finding the proof of work that solves the partial preimage hash puzzle.. Let us briefly explain these steps one by one.
The first step in bitcoin mining is downloading the entire block chain to your node. However, this is an option. It only applies to those not participating in the mining pools. Individuals who are involved in bitcoin mining are required to download the entire block chain. This step is important because it allows the miners to know past history so that they can accurately verify all future transaction and stay up to date.
Verified transactions of “blocks” are added to the block chain. All miners are supposed to verify transactions that fill up a block with valid transactions.
Miners create blocks on the block chain. Of course, these are accomplished through computer software. A given transaction is used as well as all metadata such as time, version, and target.
Finding the proof of work
Also known as an ounce, miners are tasked to solve a partial preimage hash puzzle to the entire network.
Advertising the block
Miners are tasked to broadcast the block to the entire network if they have not yet seen a
competitor block yet. This helps to keep track of all transactions.
If your block chain gets included in the longest chain, you earn profits. It is often referred to as a block reward. Clearly, bitcoin mining is a competitions.
Mining bitcoins does not in any way resemble the mining of diamonds, copper or cobalt, but it definitely involve a lot of resources, time and investments.