Understanding Bitcoin mining and its role in network security
Bitcoin mining is the process of adding transaction records to Bitcoin's public ledger of past transactions. This ledger of past transactions is called the blockchain as it is a chain of blocks. The blockchain serves to confirm transactions to the rest of the network as having taken place.
Mining involves solving complex mathematical problems using computational power. Miners compete to solve these problems, and the first to solve it gets to add a new block to the blockchain and receive a reward in Bitcoin.
Bitcoin uses a consensus mechanism called Proof of Work, where miners must expend computational energy to validate transactions and secure the network.
Miners receive newly minted Bitcoin plus transaction fees as compensation for their work securing the network.
The more miners participate, the more secure the network becomes against attacks and manipulation.
Mining serves several critical functions:
Defensive mining involves deploying hashrate not primarily for profit, but to protect Bitcoin holdings and maintain network security. Large Bitcoin holders may engage in defensive mining to: