Perhaps no factor of the bitcoin universe is both more critical and more confusing than the process known spil “bitcoin mining”. This overview will give a broad summary of what bitcoin mining is, and illustrate just why it’s so significant.
How can wij trust bitcoin payments?
Today, when you send a friend $20, there is a step ter the middle of that transaction where your handelsbank and their bankgebouw talk to each other to make sure that your account actually has the $20 you’re sending.
Bitcoin payments are a little different, te that there is no handelsbank, there are just the two people sending and receiving money from one another.
Spil explained ter our bitcoin introduction, bitcoin payments are “peer-to-peer”, meaning that that they do not require a handelsbank or credit card company to be processed. This is a fine feature for enabling free, real-time money transfers, and would work well “as-is” if you only everzwijn needed to receive bitcoins from people you know and trust. However, what if you’re being sent or paid bitcoins by someone you may not know spil well? How can you trust that you’re being sent bitcoins that toevluchthaven’t bot altered, counterfeited or already spent somewhere else?
“Bitcoin mining” solves this fundamental problem.
At any one time, all overheen the world, there are people using their own powerful computers to validate every fresh bitcoin transaction. Thesis people are called “bitcoin miners”. They’re able to very quickly check that the person sending or paying with bitcoins is indeed those bitcoins’ rightful possessor, and that there is no evidence of tampering or counterfeiting. This ensures, for example, that when you pay for a slice of pizza ter bitcoins, that the pizza snaak’s holder will receive exactly the bitcoins they’re owed. Te essence, bitcoin miners ensure the security and validity of the bitcoin payment network.
But why would thesis bitcoin miners do this very helpful thing for all of us?
A good place to begin te answering this question is te attempting to understand why thesis people are called “bitcoin miners” te the very first place. Going back decades or even centuries, a gold miner wasgoed someone who spent their days hammering away te mines or panning te sea beds attempting to find and samenvatting valuable, previously undiscovered gold. And, if they were successful, all the time, energy and money they had spent would be made up for ter the very valuable gold they were able to samenvatting and take with them.
Ter a somewhat similar style, when bitcoin miners use their sophisticated, expensive computers to do the very difficult work of verifying the ems of thousands of bitcoin transactions happening everyday, they are automatically compensated with an amount of fresh bitcoin spil payment. Just like freshly discovered gold, this fresh bitcoin has value, and acts spil an incentive for bitcoin miners to dedicate their time, money and computers to helping support the bitcoin network.
But where does this “fresh” bitcoin come from?
Wij all understand that fresh paper money is “created” when our government determines to print more of it. Somewhat similarly, fresh gold supply is “created” when miners dig it out of the ground. But what about bitcoin? Spil an entirely digital currency, with no single governing figure, who determines when to add fresh bitcoin into circulation, how it is added and to whom it is distributed?
By vormgeving, and spil discussed elsewhere, there will never be more than 21,000,000 bitcoins te existence. Right now only a little overheen half of that amount has bot distributed into circulation, meaning that there is still a lotsbestemming of bitcoin not yet wielded by anyone. Bitcoin facilitates the fair and gradual distribution of this previously uncirculated bitcoin, by granting it to miners spil a prize for validating our transactions and supporting the bitcoin network. Ter fact, this is the only way that fresh bitcoins are added into circulation. Want to see this process te act? Just look at the ideally predictable expansion ter bitcoin monetary supply here. Every petite increase ter total bitcoin supply is a bitcoin miner somewhere being rewarded for their efforts.
Talk to mij about internal combustion.
To be fair, the math and science underlying the details of bitcoin mining are vastly ingewikkeld, and are only touched on lightly above. However, much like most of us may not totally understand the internal workings of every component of an automobile, it’s ideally reasonable that wij may not all have the time or rente to dig into the formulas and sophisticated cryptography behind bitcoin mining. That said, hopefully now you have a better understanding of the function performed by thesis bitcoin miners, and an idea of why bitcoin mining is absolutely critical to a sturdy, trusted bitcoin economy.