In the previous article [Part 1], we learned about the basics of cryptocurrencies. In this article, we will look at how it works and the mining of Bitcoin and other cryptocurrencies.
Blockchain and why it is so secure?
Blockchain is a decentralized technology that enables multiple parties to maintain a shared record of transactions transparently and securely. It forms a chain of blocks, where each block contains a list of transactions. Let’s take a look at how it works simply:
In a blockchain network, there are participants called nodes. Transactions are shared with the network and turned into blocks by miners. These miners solve complex puzzles to create new blocks on a PC or a machine designed for mining. Once a block is created, it is verified by other nodes to make sure everything is correct. When a block is approved, it is added to the existing chain, forming a permanent and connected record.
Tampering with a block is extremely unlikely cause a person trying to alter a block would require more than 50% of the computational power of the network. The blocks created by miners contain a unique hash, which is created based on the information available in that block. If someone tries to tamper with this, the hash would change and other nodes will detect that change.
To successfully alter a block, an attacker would need to not only modify the targeted block but also recalculate the hash for that block and all subsequent blocks in the chain. This becomes increasingly difficult as the blockchain grows longer because it would require immense computational power and would need to surpass the combined computing power of the honest participants in the network.
Now let’s take a look at Bitcoin mining:
Bitcoin mining or any type of crypto mining involves a participant who uses heavy computational power to solve complex puzzles and create a block. These participants are called miners. If a miner successfully creates a block, it is verified by the existing blockchain, and as a reward, the miner is awarded newly minted bitcoin. Though the amount of bitcoins the miner receives depends on the network. This new block and its hash are used as a reference for future block creation.
Since many people join or leave the network of mining, the difficulty of puzzles is adjusted accordingly. A new block is added roughly every 10 min and this rate is maintained.
The mining process is different for every cryptocurrency. Each cryptocurrency uses an algorithm for mining. Bitcoin uses SHA-256. Other cryptocurrencies may use different methods like Scrypt, Ethash, Equihash, or others. Different cryptocurrencies have their own unique network rules, including block time (the frequency at which new blocks are added), block size limits, and other protocol parameters. These specifics determine how mining is conducted and how the blockchain functions.
In conclusion,
In summary, blockchain technology ensures secure and decentralized transaction records. Altering a block is highly improbable due to the network’s computational power requirements. Bitcoin mining involves solving complex puzzles to create new blocks and earn rewards in the form of newly minted bitcoins. The mining difficulty adjusts dynamically for a consistent block creation rate. It’s important to note that mining processes and algorithms differ across cryptocurrencies. Understanding the basics of blockchain and Bitcoin mining provides insights into the mechanisms that uphold the integrity of digital transactions.
Content Writer by Avinash Punvatkar
