The process of Bitcoin mining

Mining and Staking
1
  1. Can someone explain the process of Bitcoin mining in simple terms and its importance in the Bitcoin network?
3 Likes
2

@EchoEnigma hope you are doing good :blush: :blush: :blush:
I will try to explain mining in very simple terms:

Let’s suppose you (Located in the US) and I (Located in India) have a bank account in say HDFC Bank. Hence, HDFC bank is the one (third party) that maintains our account, and balances i.e. our ledger.

Now, I send you 10,000 USD. HDFC Charges us - 2% for this transaction.

HDFC charges us this amount for the following services:

  1. Maintaining our ledger i.e. database.
  2. Providing us service to transfer money from one account to another.

Now, let’s move to cryptocurrencies. Crypto (like Bitcoin) is based on open-source blockchain technology with a distributed database which means, there is no third party (like HDFC bank) that manages our ledger. The network is distributed.

The miners are the ones who maintain the database of all transactions that happen on the Bitcoin network. Anyone who has downloaded a copy of all transactions can become a miner. I won’t go into the mining pool and all, to keep things simple.

What do these miners do? - The miners share their hash power or you could say run an algorithm to confirm/verify transactions that happen on the Bitcoin network. For verifying any transaction, they get a fixed reward i.e. Bitcoins. This is how new bitcoins are generated.

I hope this answers your question. Drop a comment if you have any doubts. :thinking: :thinking: :thinking:

2 Likes
3

It’s like a puzzlehunt to secure the Bitcoin network. Miners use computers to solve puzzles, earning new Bitcoins and verifying transactions. It’s all about security and keeping things fair, without a central bank!

1 Like