Bitcoin mining

ANGLICANPAT

Not that I will ever use it, but just  for interest , Ive been trying to understand  how Bitcoin works.   https://money.howstuffworks.com/bitcoin.htm   explanation seems  very good and straightforward   (although obviously I can't judge  really)  -- but Im unclear on  the mining part. 

  I get that a bitcoin is the reward, but   is all the number crunching   the network of  computers  do ,  an   algorithm  that  decides  whether or not a new bitcoin is needed  at a given time , and if so, who  designs the algorithm to be given to the computers?  If  the number crunching isn't  about deciding whether to produce a new bitcoin,  what is it purpose? 

 How is Bitcoin attractive to normal people  in the future as it progresses, if  as below,  the winners are always going to be just  the owners of the biggest and best  computers?   Isnt that  just open to a form of   greed and manipulation  by the middle men  that they say the purpose of Bitcoin  is to eliminate?  Can anyone can  enlighten me  in  simple terms please?  

 Quote from   How stuff works     "Before anyone can even use a bitcoin, the coins must be mined by a so-called Bitcoin mining process. Any computer can begin mining for bitcoins by using a free mining application. Mining requires the entire network of Bitcoin-participant computers to do a set amount of work before being rewarded with a bitcoin. Basically, that work means a whole lot of number crunching — and the spoils go to the owner of the computer that completes the set of number crunching at hand. Some people invest many thousands of dollars in very powerful computers just to mine bitcoins. Mining has become a computing arms race, and only those at the leading edge stand to gain anything in the way of profit."

masonic

The difficulty is adjusted to keep the rate of new block being mined about the same. So the more effort that is put collectively into mining and the faster the technology becomes, the harder it is to solve the problem. If mining goes out of fashion and dwindles in popularity, then the difficulty will decrease to compensate for that. The point is that a fairly constant block rate is needed in order to process the transactions, as there is limited capacity on each block to record the transactions. Each transaction is made with a fee that goes to the miner who gets the next block, so the miner will prioritise those transactions sent with the highest fees, and so the economics balances out.

It is a very neat system, but deeply flawed in that the work is not productive, and has a negative environmental impact. Later generations of crypto have addressed those issues, but have not yet superseded bitcoin, though it seems inevitable something else eventually will.

ANGLICANPAT

I get how the difficulty is adjusted  of the number crunching to keep constancy ,  but what numbers are being crunched to find what answer ? Is it just a random varying mathematical task that constantly changes in complexity , whose only purpose is  to reward the fastest person to complete the task  with  a new bitcoin?  Who sets the task?

pbartlett

what you are asking is basically advanced mathematics and cryptography, but if you are interested google 'bitcoin mining mathematics' - or here for example:

The mathematics of Bitcoin (archives-ouvertes.fr)

What a miner has to do is connect to the bitcoin network and grap a set of unvalidated transactions. They then have to use computational power to validate these transacations against the network. Once they do that, they can add that block to the network as 'validated transactions' and obtain some bitcoins as a reward.

pbartlett

this  might also help you

hash - What is a good analogy (which a layperson would understand) for the process of Bitcoin mining? - Bitcoin Stack Exchange

agent69

Not very environmentally friendly, given that bitcoin mining uses more energy than Argentina

https://www.bbc.co.uk/news/technology-56012952

csgohan4

great get some profit and damage the environment, win/win

masonic

ANGLICANPAT said:

I get how the difficulty is adjusted  of the number crunching to keep constancy ,  but what numbers are being crunched to find what answer ? Is it just a random varying mathematical task that constantly changes in complexity , whose only purpose is  to reward the fastest person to complete the task  with  a new bitcoin?  Who sets the task?

As mentioned above, the task is generation of a cryptographic hash that has specific properties (dictated by the difficulty level). For a primer on hashes and how they relate to cryptocurrencies and mining, see https://blockgeeks.com/guides/what-is-hashing/

HansOndabush

It's just a techie version of past bubbles, Bitcoin will pop.

ANGLICANPAT

pbartlett said:

what you are asking is basically advanced mathematics and cryptography, but if you are interested google 'bitcoin mining mathematics' - or here for example:

The mathematics of Bitcoin (archives-ouvertes.fr)

What a miner has to do is connect to the bitcoin network and grap a set of unvalidated transactions. They then have to use computational power to validate these transacations against the network. Once they do that, they can add that block to the network as 'validated transactions' and obtain some bitcoins as a reward.

Thanks, your links did help.  My understanding  of actual maths is zilch ,   I was just after some of the basic  principle of how bitcoin worked . Now I  can see I totally failed to understand  even the first part that  the number crunching that gets done  and rewarded,  is   the secure   processing of the actual  financial  transactions between people,made in  in bitcoin  once its been mined and is  in use . Visible to all participants with the gang of computers so no cheating .     (I hope thats right anyway - if its not , Im going away to do something more pleasurable like sticking pins in my eyes)  

pbartlett

Yes that's right. Another (perhaps not very good) analogy is that it's 1860 and you work in a bank that has a huge great big hand-quill-pen written ledger detailing all the transactions the bank has ever made. A 'miner' would be someone who grabbed a hand full of teller-receipts from a big box where they had been dumped and painstakingly looked at each one and validated they were genuine using the ledger. Once their had validated them, they could then be hand-written into the ledger and the miner would get paid a tenner.