The distributed currency Bitcoin has been in the popular news so much that even those who normally want nothing to do with technology have come to feel that they understand quite a bit about it. Beyond the talk of huge dollar valuations, shady, underground marketplaces, and other titillating subjects, though, is an interesting realm of technical details. The whole system, it turns out, rests on some pretty fascinating and innovative concepts.
One of these is the pursuit of “mining” that observers so often hear about when the topic comes up. Mining is how new coins are generated, with those who win a sort of cryptographic race being the ones who are rewarded with the fresh currency. Mining can be profitable enough, in fact, that some who are involved with the currency have invested tens or even hundreds of thousands of dollars into equipment that is meant specifically for that task and is good for nothing else.
Mining itself is fairly straightforward, too. Whichever crypto-currency is at hand, mining of it revolves around a special kind of mathematical function known as a one-way hash. The distinguishing characteristic of such functions is that the output they produce for a given input can not be predicted by any other way than actually working through the function itself, a process that is difficult and time-consuming even for powerful computer hardware.In the case of a crypto-currency, mining is the use of such a function to attempt to derive a value that meets certain conditions. The networks that control such currencies, for example, might demand that only a miner who produces a result that begins with ten successive zeroes will be accepted as the winner at a particular time.
Miners, then, take the records of transactions that characterize these crypto-currency networks, make small, allowable adjustments, and run them through hash functions, searching for just such a result. If a miner fails to find such a solution, as they most certainly will many times, they make a new adjustment to the record and then try again. Eventually, a lucky miner will hit upon a solution that meets the necessary conditions, and will receive the crypto-currency reward after their work is verified by others, while that solution gets added to the permanent record on the network.