To know all the transactions that have ever happened in the system, Bitcoin technology uses public ledger. Every single node present on the network has its own complete copy of the transaction ledger. To secure a bitcoin, you first need to do the mining process, which confirms a new transaction between the two parties and then verify it, and lastly, it will add it to the bitcoin public ledger (BSV).
Bitcoin mining is made to be challenging, along with being resource-intensive. As a result, the number of new blocks that miners could find in a day always remains constant. It works on a consensus algorithm, which is said to be Proof Of Work POW.
The Basic Concept Of Bitcoin Mining
Under the invigilation of POW, miners were given space in an open network where they have to compete against one another to solve complicated mathematical equations. So they could be the first person to complete the transactions of the Bitcoin over the given block.
The puzzles are quite intricate, and it takes hours and lots of computing power to solve them. But when the results are out, they can be quickly verified by the system and reward the bitcoin to the person who completed it.
Once a miner gets his hands on the solution of finding a new block. He sends it to the network, which broadcasts it all over the network. After that, other miners will check the answer if it is correct or not, and then the block will be confirmed.
The cryptographic hashing is the one thing you need to thank, which takes control of the immutability and security of the Bitcoin blockchain. Hashing is the technique that outputs a 265-bit long number, which can be easily represented by 65 character hexadecimal number systems, so it will be easier for a human to comprehend it.
To measure the difficulty of blockchain mining, you first need to understand how hard it is to find a new block for the existing Blockchain. For example, the higher the difficulty, the harder it will be for the miner to find the block that suits the Blockchain and find the answer to the complex algorithm. Also, when there is a new minor in the network, the competition increases itself.
The hashing difficulty will rise so it can prevent the decrease of average search time for the block. When a single minor leaves the network, the mining difficulty of the network decreases. So as to keep the time constant when the network has less computational power dedicated to it. From 2016 onwards, the Blockchain network modifies itself at difficulty level as each new block has been found.
The Working Of Mining During Bitcoin Transaction
With no third-party central authority, Blockchain works on the decentralized peer-to-peer network, which is a crucial part of mining. In layman terms, nodes take the insertion of a new transaction when one party sends the bitcoin, and the other party receives it. Miners use different types of software to put the special inscription into their block for the Blockchain.
Nodes are like building blocks for the Blockchain. A node is just a minor that connects to the bitcoin network so he can find new blocks using his system and process the transactions. Using peer-to-peer bitcoin distributed system nodes were able to communicate with each other. All the nodes that are present in the network receive the transactions, which then verifies the transaction validity.
What Happens After The Transaction?
Once the miner gets the information about the transaction from the memory pool of the network, he individually hashes out the block and then assembles it inside a block. With the use of the Merkle Tree pattern, which is also called a hash tree, the hash from the Blockchain is organized.
A Merkle tree comes into existence when we arrange a number of transaction hashes into pairs, and then once again, we hash them out. The output of the result will be once again rehashed until we were able to reach the top of the tree. The top of the tree is said to be the root hash, a hash that represents all the other hash that was generated from it.
Given below is the list of the components that are present in a block’s header
- Root hash
- Hash from the previous block
- Client software version
- Lastly, a random number which is called a nonce.
If you want to get the block hash output, you need to hash the block header results. This newly generated block will serve as a block hash and will be served as an identifier.
For the block to be accepted in the network, a block’s header must be lower than or equal to the targeted block, which is quite a challenge because of SHA-256 working. Until one of the miners, which is present in the network, produces a valid hash minor will keep on hashing out the block header by iterating the nonce.
One the desired hash is found by one of the miners, its originator node will be broadcast to the block of the bitcoin network. Now the other nodes present in the network will check if the hash is valid and then append it in their Blockchain. As a result, there will always be an update in the ledger when a new block moves up in the mining.
When Does A Failure Occur In BlockChain Updation?
Occasionally we need to use race conditions, which helps in finding out which broadcaster came out with valid blocks from the two broadcasters. The miners, as we know, have varying speeds, which is based on their connectivity. The miner who can broadcast his hash to most of the nodes in the network will first win the race condition, and his hash will be accepted.
When this kind of situation happens where two miners have a valid block at the same time, the miners will start looking for the next block in the network based on the hash header from the first broadcaster. The same competition will take place until the next block is found. The one who is rejected will be called the orphan block.
Security Issues In Bitcoin Transaction
There is no way someone can corrupt the Blockchain. An individual can’t really corrupt the whole chain. For that, a large portion of the Blockchain needs to be under the influence of a single person. When someone is trying to control and damage the Blockchain with the power of mining, it is known as a 51% attack. As the person gets a 51% control, he can hijack the Blockchain.
To keep the blockchain safe from these kinds of attacks, proof of work is required. To be able to trespass the security successfully, one needs to have high computational power for a long period and sustain the performance to do any kind of real damage.
As a result, the cost of making such an attack is more than the final bitcoin value which the attacker gets from attacking a blockchain. Someone with so much power in their computer can use it to mine additional blocks in a fair way to generate actually valid hash numbers.
The Profitability In Bitcoin Transaction Process
Bitcoin is something that can be both profitable and expensive for some. The new equipment is not easy to obtain if you are making a rig for bitcoin mining. The machine itself costs a lot, and then the power it consumes is also a bit on the higher side.
As the ASIC has now come into play, people are now spending from a few $100 dollars on their mining machines to $10,000. To keep up with the competition, some of the machines have already adopted the change, and with some alternate settings, they are running on much lower power consumption levels and thus allowing miners to reduce the cost of mining and increase their profits.
If you are planning to start the mining process of Blockchain, you need to do a cost/benefit analysis so as to understand the breakeven price before you go out and make the purchase for the new mining equipment.
The Reward System Of BlockChain
The very first step that you need to do when you are beginning your journey of Blockchain. You need to have a unique kind of bitcoin transaction, a coin base transaction of your own. This method of the transaction will have no input whatsoever. And the new coin will be created each time you mine a new block in the network. The block rewards are the compensation for finding the new block in the network.
To be honest, Blockchain is one of the vast technologies that need a lot of work and study to achieve something profitable. But as the internet is a free tool now, you can learn a lot about it from the internet through the medium of blogs, videos, and forums.
Entering bitcoin mining is easy if you already have a powerful rig. But if you are purchasing the whole system from scratch it is better to do a cost/benefit analysis.