I was talking with one of my younger brothers last night and told him I decided to buy some bitcoin. We had a brief conversation about what bitcoin is and how it works and we got to the subject of mining. He asked what that meant and I was stumped to come up with a concise answer. One of my favorite parts about blogging is that is it a perfect place to start to hone your ideas about certain subjects and work on explaining them concisely, so here is my first attempt at describing mining to a layperson.
- Most of the currencies we're familiar with (the US dollar) are created by a central government who decides when to print more money. That's not the case with bitcoin because it operates as a peer to peer network with no one central authority.
- The easiest way to describe mining is that any individual "miner" can use special software to solve complex math problems and are issued a certain number of bitcoins in exchange for their work, a reward of sorts.
- This becomes a smart way to issue the currency and also creates incentive for people to mine.
- What miners are doings is essentially approving bitcoin transaction, so more miners also means a more secure network.
- The miners are approving a set of multiple bitcoin transactions occurring on the network and write them into a general ledger. This also ensures that the general ledger can never be tampered with.
- The mining process is designed to become naturally more complex and resource intensive over time to limit the number of bitcoins that can be created. Furthermore, as more people start mining it becomes much more difficult to solve the math problems because you're competing against more computers to solve the same problem.
- The process of mining is what keeps the bitcoin network stable, safe and secure.