How Bitcoin mining works?

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How Bitcoin mining works?

When you hear about Bitcoin "mining", you envisage coins being dug out of the ground. But Bitcoin isn't physical, so why do we call it mining? Because it's similar to gold mining in that the Bitcoins exist in the protocol's design (just as the gold exists underground), but they haven't been brought out into the light yet.

The bitcoin protocol stipulates that 21 million coins will exist at some point. What "miners" do is bring them out into the light, a few at a time. They get to do this as a reward for creating blocks of validated transactions and including them in the block chain.


A node is a powerful computer that runs the Bitcoin software and helps to keep Bitcoin running by participating in the relay of information. Nodes spread Bitcoin transaction 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 it ends up getting  around the whole network pretty quickly. Some nodes are mining nodes (usually reffered to as 'miners'). These group outstanding transaction into blocks by solving a complex mathematical puzzle.

The puzzle that needs solving is to find a number that, when combined with the data in the block and passed through a hash function, produces a result that is within a certain range. This is much harder than it sounds.

For trivia lovers, this number is called a "NONCE" which is a concatenation of "number used once." In the case of Bitcoin, the nonce is an integer between 0 and 4294967296.


Solving the puzzle:
How do they find this number (in the video)?


By guessing at random. The hash function makes it impossible to predict what the output will be. So, miners guess the mystery number and apply the hash function to the combination of that guessed number and the data in the block.

The first miner to get a resulting hash within the desired range 
announces its victory to the rest of the network. All the other miners immediately stop work on that block and start trying to figure out the mystery number for the next one. As a reward for its work, the victorious miner gets some new Bitcoin.


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