Tap here to turn on desktop notifications to get what is bitcoin mining eli5 health news sent straight to you. Bitcoin may be the next big thing in finance, but it can be difficult for most people to understand how it works. There is a whole lot of maths and numbers involved, things which normally make a lot of people run in fear. Well, it’s one of the most complex parts of Bitcoin, but it is also the most critical to its success.
As you know, Bitcoin is a digital currency. Currencies need checks and balances, validation and verification. Normally central governments and banks are the ones who perform these tasks, making their currencies difficult to forge while also keeping track of them. The big difference with Bitcoin is that it is decentralized.
If there is no central government regulating it, then how do we know that the transactions are accurate? How do we know that person A has sent 1 bitcoin to person B? How do we stop person A from also sending that bitcoin to person C? One of the most common analogies that people use for Bitcoin is that it’s like mining gold.
Apart from that, Bitcoin actually works quite differently and it’s actually quite genius once you can get your head around it. One of the major differences is that mining doesn’t necessarily create the bitcoin. Bitcoin mining requires a computer and a special program. Miners will use this program and a lot of computer resources to compete with other miners in solving complicated mathematical problems. About every ten minutes, they will try to solve a block that has the latest transaction data in it, using cryptographic hash functions. A cryptographic hash function is an essentially one-way encryption without a key. It takes an input and returns a seemingly random, but fixed length hash value.
If you change even one letter of the original input, a completely different hash value will be returned. This randomness makes it impossible to predict what the output will be. How Are Hash Functions Useful For Bitcoin? Because it is practically impossible to predict the outcome of input, hash functions can be used for proof of work and validation. The difficulty of these puzzles is measurable. However, they cannot be cheated on. This is because there is no way to perform better than by guessing blindly.