Miners are paid any transaction fees as well as a “subsidy” of newly created coins. This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system. Bitcoin mining is so called because it resembles the mining of other commodities: What is Proof of Work? A proof of work is a piece of data which was difficult costly, time-consuming to produce so as to satisfy certain requirements.
It must be trivial to check whether data satisfies said requirements. Producing a proof of work can be a random process with low probability, so that a lot of trial and error is required on average before a valid proof of work is generated.
Why do we even need Bitcoin mining?
Bitcoin uses the Hashcash proof of work. What is Bitcoin Mining Difficulty? The Computationally-Difficult Problem Bitcoin mining a block is difficult because the SHA hash of a block’s header must be lower than or equal to the target in order for the block to be accepted by the network. This problem can be simplified for explanation purposes: The hash of a block must start with a certain number of zeros.
Well, here is one: Easy enough to understand so far. As you probably noticed, that number consists not just of numbers, but also letters of the alphabet. In order to understand what these letters are doing in the middle of numbers, let’s unpack the word “hexadecimal.
This in turn means that every digit has 10 possibilities, In a hexadecimal system, each digit has 16 possibilities. But our numeric system only offers 10 ways of representing numbers That’s why you have to stick letters in, specifically letters a, b, c, d, e, and f.
If you are mining Bitcoin, you do not need to calculate the total value of that digit number the hash. You do not need to calculate the total value of a hash.
Bitcoin is Secure
So what do “digit hexadecimal numbers” have to do with Bitcoin mining? Remember that ELI5 analogy, where I wrote the number 19 on a piece of paper and put it in a sealed envelope?
In Bitcoin mining terms, that metaphorical undisclosed number in the envelope is called the target hash.