Welcome to the third installment of our introduction to the exciting world of cryptocurrencies through the most popular of all: bitcoin. If in previous articles we offered an introduction (url for the link: / ) and an analysis of blockchain technology, this time we are going to focus on two other key aspects of cryptocurrency: what is mining and what are the biggest security problems and trust.
Mining
What secures the network of bitcoin users exchanging the cryptocurrency is a network of miners, who record those transactions on the blockchain. This process is trivial for a modern computer, but cryptocurrency mining is difficult because the bitcoin software makes it time-consuming. Without that difficulty, people could mimic transactions to enrich themselves or to take money from others. They could record a fraudulent transaction on the blockchain and add many other trivial transactions to make unraveling the fraud virtually impossible. Fraudulent transactions could also be added to earlier blocks, rendering the Bitcoin network worthless.
Combining the difficulty with other cryptographic techniques was one of the discoveries of Nakamoto, the person or organization that created the software. The Bitcoin software adjusts the difficulty miners face to limit the network to one block with 1 megabyte of transactions every ten minutes. In this way, the volume of transactions is digestible. The network has time to review the new block and the record that precedes it and each can come to a consensus on the status quo.
If you are wondering why miners do this work, it is not for the love of bitcoin, or not only. They are financially compensated for their work.
Trust and security
Bitcoin is very resistant to manipulation despite being public. Bitcoin is not a physical entity, it cannot be stored under a mattress or in a trunk on a desert island.
To prevent fraud, however, a protection system is necessary. In traditional legal tender currencies, the arbiter who controls and records the transactions is usually a bank. In the case of bitcoin, on the other hand, there is no financial entity that has control: everyone watches everyone. Bitcoin is a decentralized network.
It is not necessary to trust someone in particular for the system to work correctly. Cryptographic protocols make sure that each new transaction block is added together with the previous one thanks to a long, immutable and transparent chain.
