The process of emergence of new bitcoins is one of the most important aspects of the cryptocurrency industry. Why is it called mining?

Many people are used to the fact that "digital" and "virtual" is worthless. After all, files can be simply copied and used. It became the first technology that is able to break this stereotype not only for ordinary people, but also for the most staunch supporters of the free distribution of software and content.

In Bitcoin, “copy protection” is built in conceptually and it is much more difficult to bypass it than to crack the protection of the program. No matter how much you copy or block database - you will receive a copy of the same bitcoins that can only be spent once.

Despite the fact that the Bitcoin client and protocol code is completely open, creating new coins is a complex and expensive process. It is impossible to generate more bitcoins than planned by the creator of the technology. And in order to get new coins, significant investments are needed in equipment, premises, cooling and electricity. That is why Bitcoin is called “digital gold” and is depicted as gold coins.

Word " mining" comes from English " mining”, which means “mining” and came into use precisely from the analogy with gold mining. The more devices in the network that are engaged in mining, the better the Bitcoin network is protected from attacks. The owners or operators of such devices are called " miners". It is also not uncommon for a “miner” to refer to the computing device itself, which is necessary for computing on the Bitcoin network.

Each new block includes a cryptographic signature based on the previous one. So the blocks interlock with each other, forming a "chain of blocks", "blockchain" (blockchain). The chain of blocks can fork, but in the end, the branch of the blockchain that most miners work on gets confirmed. This is how the network self-regulates.

Mining is the process of computing. A block in the Bitcoin network is a data array that contains information about transactions that entered the network after the creation of the previous block (for about the last 10 minutes). The Bitcoin is widely used on the Internet. The network participant who provided the calculation of the cryptographic signature of the block receives a reward in Bitcoin. At the same time, in order to obtain a “gold bar” in the form of a precious “generating transaction”, he needs to shovel tons of waste rock - hashes that are not suitable for the block.

Thanks to a mathematical theorem from the field of cryptography called "proof of work" ( Proof-of-Work, PoW), the calculation of the block depends on a programmed parameter such as complexity. The complexity of calculations in the Bitcoin network changes every 2016 blocks (about 2 weeks at 10 minutes per block) and is set depending on the average time for which all blocks were found after the previous recalculation.

But complexity is not the most important obstacle to wealth. Every four years, the block reward is halved. At the start of the system in 2009, miners received 50 BTC for each created block, and now the reward is 25 BTC. The next reduction in the award is expected in the first half of 2017. The exact date cannot be calculated, as it depends on the dynamics of changes in mining difficulty.

Why does Bitcoin need miners?

Mining is the basis of the integrity and reliability of the Bitcoin system or any other cryptocurrency. The work of miners provides all the main functions of the network:

• Confirmation of transactions (transactions);
• Protecting the network from entering false information (fake transactions and blocks);
• Protecting the Bitcoin network from various types of attacks;
• Support for the decentralization of the Bitcoin network.

Alternatives

After the advent of ASIC miners, numerous forks began to use devices that were no longer needed by Bitcoin. One of the most common alternative hashing algorithms - Scrypt - has long been a haven for video card farm owners. But in 2014, ASIC chips appeared for him. By this time, a whole "zoo" had arrived - Scrypt-N, Scrypt-Jane, X11, X13, X15, Cryptonote, Groestl, Quark and others. Many altcoins are still quite profitable to mine on PC processors or video cards.

There are digital currencies that use a different theorem, it is called "proof of storage", (Proof-of-Stake, PoS). Unlike the “proof of work” (Proof-of-Work) that the Bitcoin network uses, PoS-based currencies do not require ever-increasing computing power. For the functioning of the blockchain, they only need wallet programs that are constantly running on users' computers, and mining occurs due to the duration of storage of coins. Some forks are various hybrids of PoW and PoS technologies.

There are also more exotic options. For example, a new type of mining is gaining popularity, in which cryptocurrency (Burst and analogues) is charged for using space on a hard drive or other media. This technology is called "proof of capacity" (Proof-of-Capacity, PoC). Data carriers are now booming and this business also has prospects. Such decentralized storages can be useful, for example, for cheap distributed hosting of sites or large arrays of not very valuable data, such as collections of images, photos, music or videos.

The future of mining

Technologies such as optronics, photonics, superconductivity and quantum computing will be used to create new, faster chips. Economically, bitcoin mining is most justified in Iceland, where you can get energy from geothermal sources, and nature itself provides cooling near the Arctic Circle. Maybe there will be mining farms in the Sahara and Tibet, where solar energy utilization will be used for computing and cooling. In the long term, a good region for mining will be the coast of the Arctic Ocean and Antarctica. Energy for calculations there can be obtained from tidal power plants, cooling the chips with outside air.

And perhaps in a few years, more economical types of mining, such as Proof-of-stake and Proof-of-Capacity, will prevail, or new ones will be invented. Then huge farms devouring megawatts of electricity will become a thing of the past. But the very idea of ​​decentralized financial systems has already earned credibility and will develop regardless of how their reliability is ensured.