Cryptoeconomics basics. Part 2
Cryptocurrency and Bitcoin Mining: Understanding the Role of the Crypto Economy
A Bitcoin network aims to create an unchanging, non-censored, and dependable method for transferring value
Basically, this is achieved through the process of mining, in which miners receive bitcoins because of their successful verification of a block of transactions. A network that is more reliable and secure because there is such an economic incentive in place encourages miners to act in the most ethical manner possible.
- Cryptographic hashing algorithms are used to solve a complex mathematical problem in order to solve the mining process. A blockchain is basically a record of approved transactions with a timestamp associated with them, in which hashes are used to connect each block to the next ones, creating a record with a timestamp for each transaction.
- Mining algorithms also use hashes as a means of solving computational puzzles. Additionally, a valid digital signature must be generated from a private key in order for bitcoin to be spent. Mining technology is based on a set of technical rules, which include preventative measures in order to ensure that hackers will not get a chance to break the Bitcoin network's security.