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Thursday, September 28, 2023

In-depth Knowledge of Mining Process

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प्रणव जोशी
प्रणव जोशीhttps://newsinterpretation.com/
Pranav is a blockchain expert and AML enthusiast. He writes and contributes on the subjects of blockchain and money laundering

The mining process is used by cryptocurrency miners which solve complex mathematical problems in lesser time. In the previous article, we got a thorough knowledge of the Basics of cryptocurrency mining. In this article, we are going to gain knowledge of the Mining process, mining nodes, and techniques that are used in the day today’s life.

How Does Bitcoin Mining Process work?

To master this process, we will go through a practical scenario where we all can understand how the mining process works in detail. So, Sam is the person who transfers the cryptocurrency Bitcoin to Ruby. We will take bitcoin as the cryptocurrency for better understanding. The mining process is required for doing cryptocurrency mining.

For transferring Bitcoin from one to another, both need to have Bitcoin wallets to transfer money. Assuming that Sam sends 1Bitcoin to Ruby. The creation of transactions takes place from Sam’s side. As he wants to send Bitcoin to Ruby. The Peer to Peer network we have seen in the earlier article. With the help of Nodes Peer to Peer network builds up.  So in the given scenario Bitcoin acts as a P2P  network where Sam’s wallet provider can send transactions to the connected node.

The connected node would circulate this transaction information to its peers. The receiver node will circulate more and more as it can till it reaches the miner node. The miner node has major work to deal with the encoded transaction. After the creation of the block, it gets shared with all the nodes simultaneously. After all the process is complete, the node that is connected to Ruby’s wallet also gets updated. Through that Ruby will receive a notification in the wallet that some ‘X’ amount was sent by Sam.

Why do the nodes populate transactions daily?

Nodes play an important role in the mining process. The transaction is encrypted in an algorithm. The node does not have the power to solve that problem. Even though they try to decode the transactions, the transaction node cannot be added to the block. There are cases where the node manages to add transactions to the ledger. On a single node, it is updated.  Updation of each node is not possible.

The new bitcoin was created as per the new mechanism.  Once the new bitcoin is created the bitcoin transaction fees come into existence.  New bitcoin is distributed to the miners. How much computer power was used miners checked.

When the blocks are created the process initiates. In the nodes the block distributes. Everyone gets a notification regarding the update so that no one can tamper with the data. On one single node, the data tampering. There are a large number of nodes available in the Bitcoin Network. So there is a lot of influence on this network.

This is what the block looks like and it contains this information

Mining process

On the whole blockchain particular block identified by the block header.  For working in mining process block header hashed repeatedly. There are  a lot of blocks. Each block has a unique blockchain header. In the figure illustrated above, under the block header multiple values mentioned  like difficulty, timestamp, previous block hash, merkle root, nounce and version. Let us gain knowledge of all of it in detail.

Blockchain Header Structure

Difficulty: – Large number of computer power is required to mine the block.  It depends on the analysis of the difficulty level. If there is an increase in the difficulty then definitely the computational power would increase.

Timestamp: – Timestamp was incorporated so that every individual worked on different projects. A record of a particular event is kept in the permanent encoded form. It gives you the exact time and date of the particular event. It measures the time when the blocks get verified.

Previous Block Hash: – Previous block hash linked with the previous block or its parent block in a particular form of a chain. It has a hash of the data mentioned inside the previous block. Previous Block Hash connected to each other.

Merkle Root: – Merkle root comes into existence when all the hashed transactions come together hashes within the transaction. Each hash is further hashed. Merkle root came into existence from the origin of the Merkle tree. To verify whether the data was hacked or not, it takes the help of a mathematical formula. With the help of Merkle Root manipulation of data was checked.

For example, so let us assume one block is involved in 5 transactions. These 5 transactions should combine and form one Hash Value, This concept is called a Binary tree. The value is called Merkle Root.

Nonce: -To create different permutations combinations Nonce is regarded as the value that miners alter.  It would create a different hash in sequence. The nonce is used to give originality to the given message.  If in case the company receives the order from the same person having the same nonce, it would discard and treat it as invalid.

Version: –

In Blockchain three types of versions are used:

  • Cryptocurrency (Used by Bitcoin)
  • Smart Contract (Used by Ethereum)
  • DAPPS (Decentralize structure like Tor Browser)

Hence, this Is how most Cryptocurrency network works. The XRP coins are not mined. Transaction process verification changed.  But it comes from how it worked.

Why Mining is illegal in some countries?

The Bitcoin mining process is treated illegally where mining is carried out without the permission of any authority of the country. Subsistence activity is illegal mining. For mining, the cryptocurrency’s high electricity consumption is required. According to the analysis, the Bitcoin mining process consumes around 91 terawatt-hours of electricity annually. Mining cryptocurrency requires high electricity. As per reports,  in Finland, Bitcoin mining consumes around 91 terawatt-hours of electricity annually. Its records more than the electricity consumed by all citizens of Finland.   So countries like China which have environmental issues ban cryptocurrency mining.

In the same way, countries that have financial sanctions like Iran or North Korea use bitcoin mining to use electricity as raw material. It creates cryptocurrency (the medium to transact with other countries).


So there always exist two points of view among individuals regarding using or banning cryptocurrency. There are individuals who think that cryptocurrencies are legal. Others are of the opinion that it’s very illegal to invest in cryptocurrencies. In the upcoming article, we will understand the countries that used cryptocurrencies as legal for using different technologies. The others that used cryptocurrency illegally included money laundering scams, hacking, etc.

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