2. Running the Network

A digital ledger is safe. How then, do you keep the network operating? Electricity is expensive and computers are valuable. How can you get people to use both on something that is simply recording transactions? Rewards.

Mining

Mining cryptocurrencies is solving a puzzle before anyone else using a specialized computer in order to get a reward, being some of the cryptocurrency. When bitcoin first began, the difficulty of the puzzle was minimal because not many people were trying to solve it. Over the years, it has become exceedingly difficult to prevent the market from having too much supply. This code is made more and more difficult by setting the one rule of mining to be harder to achieve. The purpose of mining blocks is to confirm transactions between users.

When a block is mined, the winning miner effectively did so by chance. For their efforts (computing power and electricity used), they receive some coins from the network that were set aside when the genesis block was made for the explicit purpose of rewarding miners. For Bitcoin, an algorithm is used where your computer has to brute force input random numbers until the generated output is below a certain threshold. This is impossible to cheat because the output number is generated by using the transactions made on the network and the output number of the previous block.

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