How does mining help secure bitcoin?

How does mining help secure bitcoin?

Before discussing this subject, we should remember how Bitcoin works. Bitcoin is a digital currency that allows two people to enter into a financial transaction without any intermediaries, whether this is banks, financial institutions or credit card issuers. While simple to use, this technology is loaded with validation processes to eliminate any fraud.

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Mining Process

One of the key features for fraud prevention is the mining process. Bitcoin transactions are stored in something called a “block.” If the bitcoin network is essentially a massive accounting book, then the blocks are its pages. Each block can store 1 megabyte of data and it’s the miners’ job to confirm the authenticity of the transactions contained in the block.

The miners do not do this for fun, of course. Every time a miner completes a block, he earns bitcoins as a reward. Right now, miners earn 25 bitcoins per block, which is about US$16,000. Completing a block is the only way for new bitcoins to come into circulation.

secure BitcoinThese people do this by taking each transaction’s corresponding data and using it to complete a math problem. The solution is known as a “hash”—a shorter, unique string of digits that has all the important transaction information within the block. Once completed, the hash creates a connection with the last block, and that's how bitcoin creates a permanent and unalterable transaction log (changing a hash would require a change in the accounting book of all persons who are working within the bitcoin system).

All records could be rewritten?

In theory yes, but is most likely impossible. There is a hypothetical scenario called a "51% attack", where an individual miner has 51% of the processing power of the bitcoin network. Since the miner controls most of the network, he could make fraudulent transactions and verify them on their own, or reuse bitcoins that had already been spent. This would create a chain reaction that could potentially bring down the entire bitcoin network system. Yet, because the Bitcoin network has been around for so long, he or she would have to spend a lot of resources and money to make this attack. Studies had estimated this would cost up to $400 million to proceed with. One of the main properties of the blockchain, the technology behind the bitcoin, is transparency - if some evildoer tries to take over 51% of the network, he will likely be identified quickly by the other components of it.< Therefore, the fact the Bitcoin mining network is decentralized, as well as being open to anyone who is interested in participating in it, and because the transactions recorded by the miners at the blockchain are public, this block mining model makes the network quite secure and independent. This is because there is no centralized entity that is responsible for all the processing, which would need to earn the confidence that it would be doing all things correctly and with transparency. The block mining process is one of the foundations of the Bitcoin network security.
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