The Mining Process

Block structure and the process of mining

The technology at the heart of the BTC network is designed to bundle together transactions (called blocks) and validate them approximately once every ten minutes. A reward is issued to network participants (miners) that contribute computational resources to making this process secure. With huge rewards promised to the miner that creates a new block, and the rapidly increasing computational power that is thrown at the task, how is this interval kept constant? To answer this, let’s take a look at the structure of a block, and the process a miner completes when mining each block.

Blocks on the network are essentially chunks of data: each chunk starts with some information about itself and the preceding block, and a list of transactions, and a random string of letters. The miner’s job is to compile this data and broadcast it to the rest of the network. Only then do they get to claim the block reward, alongside transaction fees.

The network chooses a miner to validate a block by holding a lottery: the first miner to find a winning ticket gets to “mine” the block and keep its reward. A miner can generate their lottery ticket by feeding the block’s chunk of data through a specific algorithm to generate a (essentially) random number. A miner can generate a new lottery ticket (without changing the transaction data in the block) by changing the “nonce” – a “nonsense” string at the end of the block.

If the miner can find a nonce that, when added to the block data and fed into the algorithm, is low enough to be accepted, then it is valid and the miner wins the lottery. By requiring that this random number is lower than some value, the network is able to control the number of winning tickets available. The lower this requirement is, the fewer winning tickets there are to find, and the more guesses that must be made before a miner wins the lottery.