Chapter 1
What is Bitcoin Mining?
Bitcoin mining is the backbone of the Bitcoin
network.
Miners provide security and confirm Bitcoin
transactions.
Without Bitcoin miners, the network would be
attacked and dysfunctional.
Bitcoin mining is done by specialized computers.
The role of miners is to secure the network and to process
every Bitcoin transaction.
Miners achieve this by solving a computational problem
which allows them to chain together blocks of transactions
(hence Bitcoin’s famous “blockchain”).
For this service, miners are rewarded with newly-created
Bitcoins and transaction fees.
Chapter 2
How Does Bitcoin Mining Work?
What is Bitcoin mining actually doing?
Miners are securing the network and
confirming Bitcoin transactions.
Miners are paid rewards for their service every
10 minutes in the form of new bitcoins.
What is Bitcoin Mining Actually Doing?
What is the point of Bitcoin mining? This is something we're
asked everyday!
There are many aspects and functions of Bitcoin mining and
we'll go over them here. They are:
1. Issuance of new bitcoins
2. Confirming transactions
3. Security
Mining Is Used to Issue new Bitcoins
Traditional currencies--like the dollar or euro--are issued by
central banks. The central bank can issue new units of money
ay anytime based on what they think will improve the
economy.
Bitcoin is different.
With Bitcoin, miners are rewarded new bitcoins every 10
minutes.
The issuance rate is set in the code, so miners cannot cheat
the system or create bitcoins out of thin air. They have to
use their computing power to generate the new bitcoins.
Miners Confirm Transactions
Miners include transactions sent on the Bitcoin network in
their blocks.
A transaction can only be considered secure and complete
once it is included in a block.
Why?
Because only a when a transaction has been included in a
block is it officially embedded into Bitcoin's blockchain.
More confirmations are better for larger payments. Here is a
visual so you have a better idea:
0
Payments with 0 confirmations can still be reversed! Wait for
at least one.
1
One confirmation is enough for small Bitcoin payments less
than $1,000.
3
Enough for payments $1,000 - $10,000. Most exchanges
require 3 confirmations for deposits.
6
Enough for large payments between $10,000 - $1,000,000.
Six is standard for most transactions to be considered
secure.