LeoGlossary: Mining (Cryptocurrency)

The process of verifying transactions using the Proof-of-Work (PoW) consensus mechanism. It is a process that uses computer hardware to try and solve a hash with trillions of combinations.

Miners tend to focus upon having as much computing power as possible since it gives the greatest chance of solving the hash and earning the right to create a block. The incentive is paid out in the native coin.

This is the mechanism that is utilized by Bitcoin.

Those who engage in mining are known as miners.

Bitcoin Breakthrough

Bitcoin was introduced by Satoshi Nakamoto. This was a revolutionary moment in the development of private, electronic money. Bitcoin was the first decentralized electronic validation mechanism. Prior to this, all electronic ledgers were controlled by centralized entities.

The biggest breakthrough came from solving the double spend problem without the use of a centralized entity. This was the issue with some other earlier initiatives by the Cypherpunks such as Bit Gold. Created by Nick Szabo, this was similar to Bitcoin with one major flaw: Bit Gold required a centralized entity to solve the issue.

Bitcoin uses the mining process to arrive at consensus on each transaction. The competition for block rewards provides the incentive to secure the network with as much computing as possible.

Due to the expansion of Bitcoin mining, it is unlikely that any single entity will get enough hash rate to launch a 51% attack.

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