Recently over dinner, I was asked to explain bitcoin mining, and I struggled as it is entangled with a number of other concepts. What is bitcoin mining? To understand this in more detail, the rest of the post describes: How do bitcoin transactions work? Why is mining needed in bitcoin? Why do miners mine? Make a payment a bitcoin transaction Wait for it to be mined in a block average 10 mins Wait for more blocks to be mined on top average 10 mins per block 1.
Wait for it to be mined in a block average 10 mins. Miners take the list of unconfirmed transactions specifically, those that they know aboutand they bundle them into a block, which is just a list of transactions plus some other data. If they guess right, then the block is published to the rest of the network. The computers on the network validate that the block meets the criteria, and then ignore it or store it into their blockchains.
The competition then starts again with the unconfirmed transactions that have accumulated since.
The network adjusts the difficulty of the guessing game to target a block being created every 10 mins or so, irrespective of the amount of computing power in the network. Wait for more blocks to be mined on top average 10 mins per block.
If you are receiving a payment, then the higher the value your payment, the longer you may want to wait to reduce the chance of your payment being unwound. There are two parts to this. First you need a way to get transactions into the ledger, secondly you need a way to make it expensive for miscreants to add dishonest blocks. Transactions are added to the ledger in blocks so as to create some sort of time order to the transactions. However, the guessing game makes it computationally expensive therefore financially expensive to add blocks.
This cost acts as a deterrent to miscreants who would otherwise want to add their dishonest blocks. So to dominate the network, you just need to create many aliases who are all under your control and all agree with each other. Act 2 It is cheap and easy to spawn validators who all agree with each other. Therefore it is very cheap to bully the network. So for a network to be secure against this, you need to have a more expensive way to bully the network.
Act 3 Computational power is more expensive and requires investment and upkeep. Therefore use majority-by-computational-power instead of majority-by-numbers. So miscreants will need to spend a lot more money to dominate the network. The reward decreases with time, and in theory, transaction fees will replace the block reward.