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There are three ways you can get bitcoins. Buying them on an exchange, someone to send you some and to mine it.

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Blockchain is the public ledger for bitcoins which is accessible from everywhere and for everyone. It also prevents bitcoins to be re-spend by distinguishing legimate BTC transactions.

Mining is basically adding transaction records to the blockchain.

The name blockchain is given to this public ledger by the virtue of it being literally a chain of blocks. These “blocks” are lists of transactions made in a time interval. Once a block is generated, miners put it through a process.

A complex mathematical formula is applied to the information in the block and turn it into a shorter, randomly sequenced letters and numbers which is now called a “hash”.  Hashing means taking an input string of any length and given out an input of a fixed length. The transactions are taken as an input and run through a hashing algorithm, in BTC case it’s SHA-256, which gives an output of a fixed length.  Thus, the output will always have a fixed 256-bits length no matter how big or small your input is. This is highly important when you are dealing with a huge amount of data and transactions. Hash acts like a digital wax seal, every single one is unique and an attempt to change just one character in a bitcoin block completely changes the hash sequence. If someone tampers with a single block of transactions, the hash related to it will change and so will all the following hash sequences in the blockchain. Thus also enables every attempt to be spot by everyone using it.

The speed at which you mine bitcoins is measured in hashes per second.

Bitcoin Mining Rewards

Discovery of new bitcoins is called mining. Simply, the verification of bitcoin transactions.

For example Monica buys a book from Alex. Miners begin to verify the transaction to make sure Monica’s bitcoin is a genuine bitcoin. It’s not just one transaction miners are trying to verify but many. The transactions are gathered into boxes with a virtual padlock on them. Miners run software to find the key that will open that padlock. Once the computer finds it, the box pops open and the transactions are verified. For finding that hard-to-find key once, the miner gets a reward of 25 newly-generated bitcoins.

That was in 2014.

In 2017, the reward for mining halved to 12.5 new bitcoins and will continue to do so in every 210,000 blocks.

What are Complications?

Proof of work is a piece of data which is difficult (time-consuming and costly) to produce so as to satisfy certain requirements.

Proof of work can be a low probability process, so a lot of trial and error is required before generating one. Bitcoins uses the Hashcash proof of work.

Bitcoin difficulty is also implemented in the process to make mining more complicated. It is a measure of how difficult it is to find a hash below target value (a 256-bit number) during the proof of work. It is recalculated every 2016 blocks to a value such that the previous 2016 blocks would have been generated in exactly two weeks had everyone been mining at this difficulty.

This means it will take approximately ten minutes for one block to be mined. But as more miners join, the creation rate for a block inevitably will go up. Then, recalculated difficulty level rises in order to compensate and pull the rate of block creating back down. Any block released which failed to reach required difficulty level will be rejected and be worthless.

Since the process enables new coins to be created at a low rate, it resembles the rate at which other commodities like gold are mined from the ground. Thus; the process to create new coins are called mining.

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