Blockchain mining is initially difficult to understand but actually, it’s quite simple.
Let’s start off with a simple view of Blockchain mining. I want to put a transaction on the blockchain to register permanently that something has occurred in a way that is verifiable by anyone with access to the blockchain.
This transaction can be a cryptocurrency transaction like a bitcoin payment or some more complex contractual agreement.
So let’s say I want to register a change in property ownership.
- I log on to a land registry application/website.
- I enter the details and the application sends this to the blockchain in question (remember there are many).
- Mining process begins
- It is placed in a queue with a bunch of other transactions, these are group together into what is called a block.
- This block is sent to be mined by miners (either individuals, companies or groups (pools), you do not necessarily know who these are.
- The miners use fast computers to perform massively technical calculations to verify the transactions in the block, this is the mining process.
- The miners all come to a consensus that the block is valid (Proof).
- This is then written to the blockchain.
- The miners get a payment for doing the heavy duty calculations just in the same way as we used to pay the likes of IBM for computing power on an as-needed basis back in the ’70s.
- Mining process ends
That’s the end of the basic process! So simply put miner’s hire out their computing power to solve really difficult maths problems. The system is designed to give a return based on estimated computing power and electricity costs.
Bitcoin mining is pretty much the same process however as a byproduct of the mining new Bitcoins is created and distributed to the minors as remuneration.
I would advise that if you are looking at becoming a miner you be very careful as it’s a great way to lose money if you don’t know what you’re doing.