In the traditional forms of financial systems
governments are responsible for printing money when the need arises. But in the
digital currency system of bitcoin, money is not printed at all as it is a
digital currency rather it is discovered. Computer users all across the world
‘mine’ for the coins by competing against each other.
The
Process Involved In Mining
People are continuously sending and receiving the
bitcoins among each other over bitcoin network. There has to be someone who
keeps a record of all these transaction otherwise on one would be able to know
who paid whom and how much. The bitcoin network deals with this problem in a
unique way by collecting all the transactions made during a set period into a
list which is called a block. The miner is the person who confirms those
transactions and writes them into a general ledger which is available online.
The
Use Of Hash For Legitimating the Bitcoin Block
This general ledger of the bitcoin network is a long
list of blocks which are known as block chain. It could be used to explore any
transaction made between any bitcoin addresses, at any point of the time in the
network. Whenever a new block is created it is simply added to the block chain
which makes it longer and longer with each transaction.
In order to increase the trust in the block chain as
well as keep it away from any harm like tampering, the miners are employed.
Whenever a block of transaction is created, miners put it through a rigorous
process. They usually take the information from the block and apply a
mathematical formula which turns it into shorter, random sequence of letter and
numbers known as hash. This hash is then stored long with the block, precisely at
the end of the block chain.
Hash acts as a digital version of wax seal which
proves that the particular bitcoin transaction is legit. It also confirms that
this particular block and every other block after it is legit, if someone
notoriously tries to tamper with it, then everyone would know in matter of
seconds.
Miners
Competing Against Each Other For Bitcoins
Miners had to compete against each other for sealing
off the block by using a software written specifically to mine blocks. Each
time someone successfully creates a hash, they are gets a reward worth 25
bitcoins. Then the blockchain is updated and everyone on the bitcoin network gets
to know about it. This is incentive given to the miners for validating the
bitcoins transactions and keeps the system working smoothly.
The Bitcoin protocol is very deliberate in its
function and it makes the process of hashing extremely difficult by introducing
‘proof of work’. This protocol will not accept any old hash. It demands the
miners the miners to implement a hash in a specific way wherein it must have certain
number of zeroes at the beginning. Next time you buy bitcoins make sure that your bitcoin transaction block is
sealed of the miner and it is put into a block chain before making any more
transactions.
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