Mastering Bitcoin, 3rd Edition

Chapter 12. Mining and Consensus

The word “mining” is somewhat misleading. By evoking the extraction of precious metals, it focuses our attention on the reward for mining, the new bitcoins created in each block. Although mining is incentivized by this reward, the primary purpose of mining is not the reward or the generation of new bitcoins. If you view mining only as the process by which bitcoins are created, you are mistaking the means (incentives) as the goal of the process. Mining is the mechanism that underpins the decentralized clearinghouse, by which transactions are validated and cleared. Mining is one of the inventions that makes Bitcoin special, a decentralized consensus mechanism that is the basis for P2P digital cash.

Mining secures the Bitcoin system and enables the emergence of network-wide consensus without a central authority. The reward of newly minted bitcoins and transaction fees is an incentive scheme that aligns the actions of miners with the security of the network, while simultaneously implementing the monetary supply.

Tip

Mining is one of the mechanisms by which Bitcoin’s consensus security is decentralized.

Miners record new transactions on the global blockchain. A new block, containing transactions that occurred since the last block, is mined every 10 minutes on average, thereby adding those transactions to the blockchain. Transactions that become part of a block and added to the blockchain are considered confirmed, which allows the new owners of the ...