How blocks are mined in blockchain?

Everyone has heard about magical bitcoin mining, probably it is being imagining. as a lot of computers hidden in some dark building which…

Kacper Hernacki

Jul 7, 2022 — 2 min read

Everyone has heard about magical bitcoin mining, probably it is being imagining. as a lot of computers hidden in some dark building which are constantly working and paid in BTC.

However, how mining process looks like in real world?

Agenda:

introduction,
How does mining bitcoin look like?
Methods of validating new blocks,
Proof of work,
Proof of stake,
Types of mining,
Individual mining,
Pool mining,
Cloud mining
What will happen when last block in bitcoin network will be mined?

How does mining look like?

Simply said, mining is the process in which miners are verifying the transactions and next adding it to the blockchain. It requires solving the hash function, more about it in my latest tweet.

In a result of solving very complex hash function, miner is paid with bitcoins. That’s why it is called mining, because of the final process, which causes with new coins distributed in bitcoin ledger.

Methods of validating new blocks

Described above process is validated with proof-of-work method. It relies on doing specific work, which is solving the hash function. In bitcoin it takes about 10min. Another method is proof of stake. Let’s explain it below.

Proof of stake

This method Is slightly different than previous one. PoS (proof-of-stake) relies on selecting validators in proportions to their quantity of holdings in the associated currency.

Types of mining

individual mining,
Pool mining,
Cloud mining

Individual mining

Individual mining is proceed when a single user of chain register himself as a miner and next will be trying to solve given hash function. When he solve the problem as the first one, transaction will be added and he will be rewarded.

Pool mining

A lot of transactions are happening every second, so that to be more effective and better rewarded miner, some of them are joining to “the teams” and cooperate with each other. When some member will solve the function, he splits the rewards with the rest of group.

Cloud mining

It is an alternative for miners with worse hardware. These miners are not worried about heating, ventilation, etc. it is resulted with smaller profits.