I don’t understand this mining.. admittedly, I haven’t educated myself.
How can one just “mine” money?
Like with a cloth?
Can I keep digging in my yard and find random money?
From what I understand these miners verify a Bitcoin transaction so as a reward if you verify enough transactions you get to birth a new bitcoin.
>> don’t understand this mining.. admittedly, I haven’t educated myself.
How can one just “mine” money?<<
It was the subject of a BBT episode. They explained it but I still didn’t get it.
“How can one just “mine” money?
“Mining” is simply being rewarded for running complex calculations to verify the block chain record.
From Satoshi Nakamoto's original paper (boldface added):
By convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides a way to initially distribute coins into circulation, since there is no central authority to issue them. The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended.
The CPU time he references is expended to guess a number having a cryptographic hash with a minimum number of leading zero bits. There is no way to do that other than brute force: keep generating new numbers until one of them has a hash with enough leading zeros. As the number of required leading zeros gets larger, the difficulty increases exponentially. Thus, the work factor is adjusted upward as the available computing power increases, progressing as it has from multicore CPUs to GPUs to ASICs. The protocol is such that bitcoins are found at a declining rate, eventually approaching a limit of around 21 million in the total BTC money supply. Currently, around 72 leading zero bits are required.
The hash function that bitcoin uses is SHA-256, a brainchild of the NSA. Given an input, it produces a 256-bit number that depends unpredictably on that input. E.g., SHA-256('CygnusXI') is:
9d3f77df8b4961fdbaaeb8dcd38b6d7367954e36673eb56381b36c0fe42dc646
Zero leading zeros. Let's try SHA-256('cynwoody'):
e9068b8085137d56725f1fc4f67287772155f2f06ded319b01e5a4cd9733c27c
Lose again! Let's try again, changing one bit in the input, SHA-256('Cynwoody'):
07ef34f3ffb2c71f7bd1f98813e9bb8c77e372681eb0a215d7980e622c530ece
Ah, progress! Five leading zeros. But we need 72, so we're still SOL.
I got the impression that it was based on prime numbers, but not exactly. The first few are easy to figure out: 2, 3, 5, 7...then it gets harder....11, 13, 17. By the time you get to 2^20 it is very hard.