By ICO Alert
- Bitcoin mining entails a proof of work verification system to prevent counterfeits
- Unlike fiat currencies, bitcoins cannot be fabricated without reason
Ranked number two on Google’s world news search list in 2017, most people have heard of Bitcoin, yet remain puzzled by the concept of Bitcoin mining. So it is entirely understandable if you are still asking yourself, “What the heck is Bitcoin mining?”
Why This Matters: Simply stated Bitcoin mining is an activity which adds the cryptocurrency transactions to the blockchain ledger. The operational significance of mining is that it may just be the foundation of trust within Bitcoin’s ecosystem. Enthusiasts trust Bitcoin because unlike traditional fiat currencies which are printed, Bitcoin blocks are mathematically “mined.”
How does mining work? It entails a proof of work verification system and the purpose is to prevent counterfeit currency, also known as double spending. In addition to verifying transactions, miners are also creating new coins. Bitcoin mining, like gold mining, establishes a base value for every coin. On top of creating value, mining ensures transactions are not replicated. In exchange for verifying transactions, miners get block rewards in Bitcoin.
Unlike traditional mining that involves explosives and drilling, Bitcoin mining incorporates proof of work by having miners solve mathematical problems which produce hashes. Miners must find a special number that results in a block hash and meets certain parameters. It’s a mathematical puzzle.
The proof of work protocol though somewhat laborious, offers protection against bad actors. It creates a process that generates hashes for new blocks and also an atmosphere free of inflation.
Situational Awareness: Bitcoins are mined into existence for the benefit of the whole network. In contrast to fiat currencies, bitcoins cannot be fabricated or manifested for no reason. So the mining of Bitcoin is a productive method to incentivize multiple parties by providing value simultaneously.
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