The Powerful Idea Behind Mining
Mining is how we can generate new coins and verify transactions. It involves vast, decentralized networks of computers around the world to verify and secure blockchains - virtual ledgers that record cryptocurrency transactions. In exchange for their processing power, the computers in the network are rewarded with new coins. It is a virtuous circle: miners maintain and secure the blockchain, the blockchain allocates coins, and coins incentivize miners to maintain the blockchain.
Each block uses a hash to refer to the previous block, forming a continuous chain that leads back to the first block. As a result, peers on the network can easily verify whether certain blocks are valid and whether miners who have validated each correct hash decode receive a reward. Over time, as miners deploy more advanced machines to solve Proof-of-Work, the difficulty of the equations on the network increases. At the same time, the competition among miners is increasing, thus increasing the scarcity of cryptocurrencies.
In addition to putting new coins into circulation, mining is at the heart of the security of cryptocurrencies. It verifies and secures the blockchain, allowing the cryptocurrency to function as a decentralized peer-to-peer network without third-party oversight. And that incentivizes miners to bring their computing power to the network.
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