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@ -215,7 +215,7 @@ If Bob's bitcoin wallet application is directly connected to Alice's wallet appl
=== Bitcoin Mining
((("mining","blockchains")))The transaction is now propagated on the bitcoin network. It does not become part of the shared ledger (the _block chain_) until it is verified and included in a block by a process called _mining_. See <<mining>> for a detailed explanation.
((("mining","blockchains")))The transaction is now propagated on the bitcoin network. It does not become part of the shared ledger (the _block chain_) until it is verified and included in a block by a process called _mining_. See <<ch8>> for a detailed explanation.
The bitcoin system of trust is based on computation. Transactions are bundled into _blocks_, which require an enormous amount of computation to prove, but only a small amount of computation to verify as proven. The mining process serves two purposes in bitcoin:
@ -226,11 +226,11 @@ A good way to describe mining is like a giant competitive game of sudoku that re
In <<user-stories>>, we introduced Jing, a computer engineering student in Shanghai. Jing is participating in the bitcoin network as a miner. Every 10 minutes or so, Jing joins thousands of other miners in a global race to find a solution to a block of transactions. Finding such a solution, the so-called proof of work, requires quadrillions of hashing operations per second across the entire bitcoin network. The algorithm for proof of work involves repeatedly hashing the header of the block and a random number with the SHA256 cryptographic algorithm until a solution matching a predetermined pattern emerges. The first miner to find such a solution wins the round of competition and publishes that block into the block chain.
((("mining","profitability of")))Jing started mining in 2010 using a very fast desktop computer to find a suitable proof of work for new blocks. As more miners started joining the bitcoin network, the difficulty of the problem increased rapidly. Soon, Jing and other miners upgraded to more specialized hardware, such as high-end dedicated graphical processing units (GPUs) cards such as those used in gaming desktops or consoles. At the time of this writing, the difficulty is so high that it is profitable only to mine with application specific integrated circuits (ASIC), essentially hundreds of mining algorithms printed in hardware, running in parallel on a single silicon chip. Jing also joined a "mining pool," which much like a lottery pool allows several participants to share their efforts and the rewards. Jing now runs two USB-connected ASIC machines to mine for bitcoin 24 hours a day. He pays his electricity costs by selling the bitcoin he is able to generate from mining, creating some income from the profits. His computer runs a copy of bitcoind, the reference bitcoin client, as a backend to his specialized mining software.
((("mining","profitability of")))Jing started mining in 2010 using a very fast desktop computer to find a suitable proof of work for new blocks. As more miners started joining the bitcoin network, the difficulty of the problem increased rapidly. Soon, Jing and other miners upgraded to more specialized hardware, such as high-end dedicated graphical processing units (GPUs) cards such as those used in gaming desktops or consoles. At the time of this writing, the difficulty is so high that it is profitable only to mine with application-specific integrated circuits (ASIC), essentially hundreds of mining algorithms printed in hardware, running in parallel on a single silicon chip. Jing also joined a "mining pool," which much like a lottery pool allows several participants to share their efforts and the rewards. Jing now runs two USB-connected ASIC machines to mine for bitcoin 24 hours a day. He pays his electricity costs by selling the bitcoin he is able to generate from mining, creating some income from the profits. His computer runs a copy of bitcoind, the reference bitcoin client, as a backend to his specialized mining software.
=== Mining Transactions in Blocks
((("mining","transactions in blocks")))((("transactions","mining in blocks")))A transaction transmitted across the network is not verified until it becomes part of the global distributed ledger, the blockchain. Every 10 minutes on average, miners generate a new block that contains all the transactions since the last block. New transactions are constantly flowing into the network from user wallets and other applications. As these are seen by the bitcoin network nodes, they get added to a temporary "pool" of unverified transactions maintained by each node. As miners build a new block, they add unverified transactions from this pool to a new block and then attempt to solve a very hard problem (aka Proof-of-Work) to prove the validity of that new block. The process of mining is explained in detail in <<mining>>.
((("mining","transactions in blocks")))((("transactions","mining in blocks")))A transaction transmitted across the network is not verified until it becomes part of the global distributed ledger, the block chain. Every 10 minutes on average, miners generate a new block that contains all the transactions since the last block. New transactions are constantly flowing into the network from user wallets and other applications. As these are seen by the bitcoin network nodes, they get added to a temporary pool of unverified transactions maintained by each node. As miners build a new block, they add unverified transactions from this pool to a new block and then attempt to solve a very hard problem (a.k.a., proof of work) to prove the validity of that new block. The process of mining is explained in detail in <<mining>>.
Transactions are added to the new block, prioritized by the highest-fee transactions first and a few other criteria. Each miner starts the process of mining a new block of transactions as soon as they receive the previous block from the network, knowing they have lost that previous round of competition. They immediately create a new block, fill it with transactions and the fingerprint of the previous block, and start calculating the Proof-Of-Work for the new block. Each miner includes a special transaction in his block, one that pays his own bitcoin address a reward of newly created bitcoins (currently 25 BTC per block). If he finds a solution that makes that block valid, he "wins" this reward because his successful block is added to the global blockchain and the reward transaction he included becomes spendable. Jing, who participates in a mining pool, has set up his software to create new blocks that assign the reward to a pool address. From there, a share of the reward is distributed to Jing and other miners in proportion to the amount of work they contributed in the last round.