The world’s largest cryptocurrency Bitcoin is a major entity in the global cryptocurrency ecosystem. Therefore in order to ensure that the network remains secure and stable it is necessary to keep it away from any kind of hackers or elements that might harm it. This article delves deep into the process through which Bitcoin secures it’s network.
- A very important event in computer science is “Bitcoin mining” which has turned into a technological breakthrough wherein the Bitcoin is being mined on the network while simultaneously the entire transactions are also being validated on the entire blockchain network.
- The inner mechanism through which it functions is powered by miners. Miners are known as nodes who are involved in a race with the objective of solving a computational power intensive puzzle which is technically a “Proof of work” puzzle.
- In the race the first miner who can discover the solution and get it permitted by a majority number of miners on the blockchain network gets access to writing the block of the upcoming transactions on the blockchain network. The book on which these transactions are written is known as the “Bitcoin’s distributed ledger.”
- However in lieu of his efforts the node ie. The miner is rewarded in the form of a predetermined amount of a newly minted Bitcoin. This reward is also termed as the “Block reward.”
This entire competition takes around ten minutes and the moment the solution is discovered it is supposed to be accepted by the 51% of the crowd on the network. The moment this process is executed immediately the process is repeated and it starts again.
Therefore while mining Bitcoin it requires computation power ie. Energy in order to mine the Bitcoin therefore there is a real cost associated with the mining process of Bitcoin which is similar to mining gold. This cost immediately gives Bitcoin value as well as “digital scarcity” which helps maintain the value of Bitcoin.
While executing mining the most crucial catalyst is the “transaction data.” If in case a miner executes the process without using a valid transaction the other miners existing on the blockchain won’t validate the transaction. Thus the miner will never be able to reach a consensus for his transaction data set. This will unable to write off a new transaction data set and execute a block making incapable of securing a reward on the blockchain.
A false transaction data will result in the miner losing all the computational power exerted into the transaction. Therefore a miner is heavily incentivised to stay honest and heavily fined incase he executes a false transaction which makes him incapable of executing a false transaction. Thus the cost of mining curates a digital scarcity as well as secures the entire blockchain network.