Bitcoin doesn’t grow on trees—it is developed through a process called mining. However, bitcoin mining is not just the creation of coins, it also facilitates the transactions that happen in the network.
How do Bitcoin transactions work?
The whole bitcoin network works on a peer-to-peer cryptographic system that is built on the blockchain, which is a public ledger that contains all of the transactions that ever took place that stretches all the way back from 2009 where the very first bitcoin was created.
First of all, if you are planning to send or acquire bitcoins from someone, both users must possess a digital wallet. Each wallet contains two important keys, a public key and a private key. These two keys are crucial for the legitimacy and security of the transaction. The private key, which is known to the user alone, is basically an identifier (digital signature) that is attached with the public key in any transaction. The public key is used to prove you are the owner of the address that can receive funds or bitcoins, it is derived from a private key and connects your account to the bitcoin market and secures it. Basically you can’t process a transaction without one another. The transaction is then sent to the network which is public to everyone. Therefore, it allows the information to be integrated and distributed in a synchronized process across the world.
This leads us to the “Mining” side of cryptocurrency. These so-called Bitcoin miners are tasked with verifying and authenticating every single transaction that occurs within the time span of each blockchain, which is roughly 10 minutes. You can think of this as the “heartbeat” of the bitcoin network. This requires a massive amount of computing power and has started a race to build the most powerful mining rigs to solve these cryptographic puzzles. Miners from all across the globe compete against each other to see who completes a transaction first.
What incentives do miners get after going through such lengths to validate all these transactions?
When the first Bitcoin miner or computer in the network is able to verify and authenticate all transactions within the blockchain, they are rewarded with bitcoins, of course. This whole process is described as Proof of Work (PoW).
The Digital Age
Bitcoin has become a lifeline for many of its users around the world who have to deal with extreme inflation of government currencies such as in Venezuela and other developing countries. It has definitely created a commotion and sparked different opinions from various people from different industries, not just the tech industry. But one thing’s for sure—Bitcoin will always remain to be preeminent and relevant as long as we are still in the Digital Age.