Mining is a process by which new blocks are added to the blockchain.
Blocks contain transactions that are validated via the mining process by mining nodes on the Bitcoin network.
Blocks, once mined and verified are added to the blockchain which keeps the blockchain growing.
This process is resource-intensive due to the requirements of PoW where miners compete in order to find a number which is less than the difficulty target of the network.
This process also secures the system against frauds and double spending attacks while adding more virtual currency to the Bitcoin ecosystem.
Miners are paid transaction fees in return for including transactions in their proposed blocks.
New blocks are created at an approximate fixed rate of every 10 minutes.
The rate of creation of new bitcoins decreases by 50%, every 210,000 blocks, roughly every 4 years.
Approximately 144 blocks, that is, 1,728 bitcoins are generated per day.
The number of actual coins can vary per day; however, the number of blocks remains at 144 per day. Bitcoin supply is also limited and in 2140, almost 21 million bitcoins will be finally created and no new bitcoins can be created after that.
Bitcoin miners, however, will still be able to profit from the ecosystem by charging transaction fees.
Tasks of the Miners
Once a node connects to the bitcoin network, there are several tasks that a bitcoin miner performs:
Synching up with the network: Once a new node joins the bitcoin network, it downloads the blockchain by requesting historical blocks from other nodes.
Transaction validation: Transactions broadcasted on the network are validated by full nodes by verifying and validating signatures and outputs.
Block validation: Miners and full nodes can start validating blocks received by them by evaluating them against certain rules. This includes the verification of each transaction in the block along with verification of the nonce value.
Create a new block: Miners propose a new block by combining transactions broadcasted on the network after validating them.
Perform Proof of Work: This task is the core of the mining process and this is where miners find a valid block by solving a computational puzzle.
Fetch reward: Once a node solves the hash puzzle (PoW), it immediately broadcasts the results, and other nodes verify it and accept the block.
Mining Rewards
When Bitcoin started in 2009 the mining reward used to be 50 bitcoins. After every 210,000 blocks, the block reward halves.
In November 2012 it halved down to 25 bitcoins. Currently, it is 12.5 BTC per block since July 2016.
Next halving is on Friday, 12 June 2020 after which the block reward will be reduced down to 6.25 BTC per block.
This mechanism is hardcoded in Bitcoin to regulate, control inflation and limit the supply of bitcoins.
Suryateja Pericherla, at present is a Research Scholar (full-time Ph.D.) in the Dept. of Computer Science & Systems Engineering at Andhra University, Visakhapatnam. Previously worked as an Associate Professor in the Dept. of CSE at Vishnu Institute of Technology, India.
He has 11+ years of teaching experience and is an individual researcher whose research interests are Cloud Computing, Internet of Things, Computer Security, Network Security and Blockchain.
He is a member of professional societies like IEEE, ACM, CSI and ISCA. He published several research papers which are indexed by SCIE, WoS, Scopus, Springer and others.
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