Is mining bitcoins

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Mining bitcoins is converter bitcoin

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The block reward is currently set at 6. End users wishing to make a transaction must attach a fee to the proposed transaction as incentive for miners to include it in the next block. Bitcoin mining is an essential component of the network's system for arriving at consensus as to the current state of the ledger. It is central to enabling people to securely make Bitcoin transactions.

The Bitcoin network is a globally distributed public ledger consisting of a giant list of timestamped transactions. For example, one ledger entry might indicate that Person A sent 1 bitcoin to Person B at 10am on Monday. The ledger is updated approximately every 10 minutes by adding 'blocks' that contain a list of new transactions.

The existence of the ledger, which is voluntarily stored by thousands of participants known as 'nodes,' allows anyone to see both the current state and complete history of bitcoin ownership. By design, there is no centralized authority deciding which transactions should be added to new blocks.

Instead, the state of the ledger ie. This decentralization is what gives Bitcoin some of it's most interesting properties - namely, censorship-resistance and permissionless-ness. Most nodes simply validate the authenticity of transactions, store the ledger, and pass on updates to other nodes again, updates take the form of new blocks added to the chain. However, a smaller group of nodes, called miners, compete to create new blocks. When miners create new blocks, they are effectively updating the state of ledger, or the 'truth' about who owns what.

Bitcoin mining serves several functions: It is a method for distributing new coins. It is part of a more complete system for ensuring only valid transactions are added to the blockchain. It is a method for prioritizing transactions given limited throughput it creates a fair market for limited block space. It provides financial incentive for participants miners to dedicate resources to the network, and the resources dedicated help secure the network from attackers.

Note that attackers here primarily refers to miners themselves. In other words, by making it expensive to mine, Bitcoin ensures miners follow the rule. Proof-of-Work mining helps to secure the Bitcoin network by requiring potential attackers to commit more resources to an attack than they could hope to gain from the attack itself. In other words, it ensures that attacking Bitcoin is a money-losing and very costly prospect, making it exceedingly unlikely to occur.

The process is summarized in the Bitcoin white paper : New transactions are broadcast to all nodes. Each node collects new transactions into a block. Each node works on finding a difficult proof-of-work for its block. When a node finds a proof-of-work, it broadcasts the block to all nodes. Nodes accept the block only if all transactions in it are valid and not already spent. Nodes express their acceptance of the block by working on creating the next block in the chain, using the hash of the accepted block as the previous hash.

Let's break that down into a little more detail. To begin, miners are the ones who propose updates to the ledger and only miners who have successfully completed the Proof of Work are permitted to add a new block. This is coded into the Bitcoin protocol. Miners are free to select valid transactions from a pool of potential transactions that are broadcast to the network by nodes. Such transactions are collected into the 'mempool.

This gives rise to the fee market, which helps to ensure the limited block space is used fairly and efficiently. The first miner to complete the Proof of Work broadcasts her proposed new block to the wider network of nodes who then check to ensure that the block follows the rules of the protocol.

The key rules here are 1 all transactions in the block are valid ie. If it does, nodes send it on to other nodes who complete the same process. In this way, the new block propagates across the network until it is widely accepted as the 'truth. Moreover, due to network delays and geographic separation, nodes may receive new proposed blocks at slightly different times.

Note that one miner's newly proposed block could be slightly different from another's. This is because, as mentioned, miners are the ones who choose which transactions to include in a block - and even though they tend to optimize for profitability, location and other factors introduce variation. When two miners send out different new blocks, competing versions of the 'truth' begin to propagate across the network.

The network ultimately converges on the 'correct' version of the truth by selecting the chain that grows longer at faster rate. Let's break down that last part. Imagine there are two competing chains. Statistically, one of the miners working on version A is likely to complete the Proof of Work first, broadcasting the new version out to the network.

Since nodes always select for the longest chain, version A will quickly come to dominate the network. In fact, the probability that version B will grow faster vanishes exponentially with each additional block such that by the time six blocks have been added, it's a statistical impossibility. For this reason, a transaction that has been confirmed in six blocks is, for most participants, considered to be set in stone. Note that a block which doesn't end up becoming part of the longest chain version B in our example above is known as an orphan block.

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