Posts on the topic of cryptocurrencies

How Bitcoin Mining Works
When you hear about bitcoin "mining," you envisage coins being dug out of the ground.But bitcoin is not physical, so why do we call it mining?Similar to gold mining, bitcoins exist in the protocol's design just as the gold exists underground, but they haven't been brought out into the light yet, just as the gold has not yet been dug up.The bitcoin protocol stipulates that a maximum of 21 million bitcoins will exist at some point.What miners do is bring them out into the light, a few at a time.Once miners finish mining all these coins, there will not be more coins rolling out unless the bitcoin protocol changes to allow for a larger supply.Miners get paid in transaction fees for creating blocks of validated transactions and including them in the blockchain.To understand how bitcoin mining works, let’s backtrack a little and talk about nodes.A node is a powerful computer that runs the bitcoin software and fully validates transactions and blocks.Since the bitcoin network is decentralized, these nodes are collectively responsible for confirming pending transactions.Anyone can run a node-you just download the free bitcoin software.The drawback is that it consumes energy and storage space - the network at the time of writing takes hundreds of gigabytes of data.Nodes spread bitcoin transactions around the network.One node will send information to a few nodes that it knows who will relay the information to nodes that they know, etc.That way, the pending transaction ends up getting around the whole network pretty quickly.Some nodes are mining nodes, usually referred to as miners.These chunk outstanding transactions into blocks and add them to the blockchain.How do they do this?By solving a complex mathematical puzzle that is part of the bitcoin program, and including the answer in the block.