The Gold Rush: Mining Bitcoin

• Published in: Blockchain Enabled Applications pp. 9 - 19
• Main Authors: Dhillon, Vikram, Metcalf, David, Hooper, Max
• Format: Book Chapter
• Language: English
• Published: United States Apress L. P 2021; Apress
• ISBN: 1484265335; 9781484265338
• DOI: 10.1007/978-1-4842-6534-5_2

Mining is a key operational concept in understanding how the Bitcoin protocol functions. It refers to a decentralized review process performed on every block of the blockchain to reach consensus, without the need for a central authority to provide trust. In other words, mining is the computational equivalent of peer review in a decentralized environment where neither party involved trusts the other. We will continue our discussion of the hash function here in more depth, as it refers to mining and solving proof-of-work functions. Then, we will integrate the concepts of block target values and network difficulty with mining and how mining has evolved to keep up with the increasing network difficulty. This will lead us further into talking about the different types of hardware mining that have been developed recently. We will end the chapter with an analysis of startups that began selling dedicated hardware for mining, leading to the Bitcoin mining arms race and the startups’ eventual failure.