What is Bitcoin?
Bitcoin is a category of digital currency or crypto-currency that has been developed as an alternative to traditional currencies. The electronic money is a virtual currency that is used to buy goods and services online without incurring large transaction fees or charges.
All Bitcoin transactions are recorded on a public digital ledger known as the ‘Blockchain’. Blockchain can be used to explore any transaction made between any Bitcoin addresses, at any point on the network. Public ledger records every Bitcoin in existence. (Although owners can remain anonymous)
Mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions and to introduce new Bitcoin into the system. Since there is no central authority, Bitcoin nodes use the blockchain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
Each set of transactions that are processed is a block. The block is secured by the miners. Miners do this by creating a hash that is created from the transactions in the block. This cryptographic hash is then added to the block. The next block of transactions will look to the previous block’s hash to verify it is legitimate. Then your miner will attempt to create a new block that contains current transactions and new hash before anyone else’s miner can do so.
Since the difficulty of Bitcoin mining is very high now people will pool their miners together to have a better chance of creating a block and having it confirmed before other miners for a share of the current mining reward which is 12.5 Bitcoin, plus any transaction fees.
The series of blocks is called the blockchain. The blockchain is like your checkbook register or a general ledger of transactions. The way that Bitcoin Mining secures the blockchain makes that ledger tamper-proof and immutable.
Each block once made into a block will be verified by nodes on the Bitcoin network. This process is using Proof of Work. Proof of Work covers the Bitcoin transactions in a block and is what your Bitcoin ASIC Miner does.
The process of Bitcoin mining while difficult on the technical side to fully understand can be easily mined by anyone. Miners secure the network by using Proof of Work and creating a hash for each block that is mined, so the blockchain keeps an immutable record of all transactions taking place on the network.
Bitcoin mining is competitive, you want to solve or “find” a block before anyone else’s miner does. Then you will get the block reward and transaction fees from the block. During the last 3 years we have seen an incredible amount of hashrate coming online which made it harder and harder to have enough hashrate personally to solve a block thus getting the payout. To compensate for this pool mining was developed.