Encryption
Mining is the process of creating valid blocks that add transaction data to Bitcoin’s public ledger, called blockchain. It is a key element in the Bitcoin network that solves the problem of “double spend”.
The problem of double spending refers to the issue of searching the transaction history. A Bitcoin owner can be mathematically proven through the encryption of their public key, which cannot be broken with today’s technology. However, encryption alone cannot guarantee on its own that a particular currency was not previously sent to someone else. To form the transaction history, an order is needed based on the time each transaction was created.
Mining or “mining ” (and blockchain in general) uses financial incentives to provide a reliable way to process data. In the case of Bitcoin mining, this effect is achieved by creating consecutive blocks that can be mathematically proven to be in the correct order. The process depends on the mathematical properties of a cryptographic hash i.e. a way data encoding.
This is what Bitcoin miners do by using trillions of hashes every second until they find the ideal condition that satisfies the degree of difficulty. Both difficulty and fragmentation are very large numbers expressed in bits, and therefore the condition simply requires the fragmentation to be lower than the difficulty.
Through the difficulty requirement, the system guarantees that Bitcoin miners are doing a real job using the time and electricity they need to fragment. That is why this protocol is called proof of work i.e. “proof of work”. That’s why in order to attack the grid one would have to recreate all its mining power, which would cost billions of dollars.
Fragmentation and blocks
The process of adding new transactions to the Bitcoin blockchain is known as mining. Miners use a PoW (Proof of Work) technique in which computers or specific machines that are for mining compete to solve mathematical problems that thus validate transactions.
More generally, miners try to create a 64-digit hexadecimal number, referred to as a hash, that is less than or equal to the hash that exists as a target. Bitcoin hash percentage indicates the estimated number of hashes created by miners trying to solve the current Bitcoin block or any particular block.
Bitcoin’s hash rate is measured in Hashes per second or H/s. Miners need a high hash rate measured in mega hashes per second, giga hashes per second, and tera hashes per second to mine successfully.
Bitcoin’s code rewards miners with additional Bitcoin to encourage them to continue competing to solve puzzles and thus maintain the entire network. This is how new transactions are added to the blockchain. Bitcoin mining is significantly less profitable than it once was, as the block reward is halved every 210,000 blocks approximately every 4 years.
For example, a block of Bitcoin was worth 50 BTC when it was first mined in 2009. This was reduced to 25 in 2012. By 2016 it had fallen back to 12.5 and as of May 11, 2020 it is at 6.25. By 140 it is expected that all Bitcoin will be on the market.