>> Mining is the process of using
computer hardware to do mathematical calculations
for the Blockchain Network in order to
confirm transactions and create new Blocks.
Mining is the term used with Blockchain as a metaphor for
the process of Coal Miners who extract material from the Earth.
Blockchain Miners extract Blocks,
they do this by collecting transactions into a Block and
then submit a proposal after solving a cryptographic puzzle.
The current Block includes the hash of
the previous Block which creates a connection.
This is really how all Blocks are chained,
the hash of the most current Block has
some information about the very first Block in the chain.
In this video, I'll discuss more about how
the mining process works in relation to Bitcoin and Ethereum.
Let's get started exploring mining on the Bitcoin Network.
Each Bitcoin Block contains a number of transactions.
Each Block holds up to one megabyte of transaction data,
which means there can be a few thousand
transactions in a single Block.
Miners get to select
which transactions make up the Block that they create.
The Block of the transactions are then
verified and then become added to the chain,
and Miners receive a transaction fee and
a Block reward for the work they've done as a result.
The Block reward started at 50 Bitcoin
initially and has halved periodically since 2009.
After 210,000 Blocks are mined at approximately every four years,
the Block reward halves. So around the year 2140,
all Bitcoin will be minted and the reward will be zero.
The reward is now currently at 6.25,
and will half again in about 2024 to 3.125,
when the reward goes away,
all that will be left is the transaction fees.
Two factors typically determine transaction fees.
Those factors are network congestion and transaction size.
When the network is congested or really busy,
users will increase the transaction fee so that Miners will
choose their transactions and they can
get confirmed in a Block sooner.
This makes the average transaction fee fluctuate
quite a bit depending on how busy the network is.
In 2018, there was a huge spike where
fees reached nearly $60,
but typically the fees have averaged about $1 in 2020.
Miners are all racing to be the first to solve
the complex hashing puzzle to the current Block problem.
The Block problem is designed to take about 10 minutes to solve.
So whoever gets there first announces to the world they
have found the solution in a CoinBase transaction.
Then everyone can rehash the input to generate the output and
come to the same conclusion that this is a valid Block.
So CoinBase is the transaction
that add the Bitcoin to the system,
and once the CoinBase transaction is put up and verified,
the Miner is rewarded a certain crypto amount.
In order for the transaction to be chosen,
it needs to be agreed upon and then added to the book.
Transaction validation is not the real purpose of mining,
the real purpose is really to keep people engaged and
to have a secure network.
By only allowing a megabyte of data in each transaction,
this is to prevents people from getting too greedy.
This also means that Bitcoin isn't really for
everyday purchases like buying a coffee, or movie ticket,
for example, since it will take time for a Miner to verify
a transaction and work goes into that.
So Miners typically go for bigger transaction fees,
which also means bigger transactions,
since those are the ones that are going to
be verified first, likely.
Now, let's talk about the process for
mining on the Ethereum Network.
Generally speaking, the process is about the same,
but some details differ.
For a transaction to be verified,
it must go through the mining process,
where Miners solve the Block puzzle and
create a new Block of valid transactions.
Ethereum has transaction rounds that are 10-15 seconds,
and this transaction time is so
short because Ethereum was designed to
have smart contracts which are executed in more real time.
When a Miner validates a new Block,
they're rewarded with a certain amount of Ether.
Each Block can also have a number of transactions,
usually at least one.
But the number of transactions in the Block is going to be
limited by the amount of gas they have to use.
Gas is what prevents Miners from getting
greedy and reading infinite task.
Currently a Miner receives two Ether
as the reward plus any transaction fees.
The average transaction fee as of
2020 was about less than a dollar,
let's say about $0.75,
and the max the transaction fee has ever been,
has been about $5.
Just like with Bitcoin, the transaction fees will spike in
periods of high congestion on the network.
By the end of 2018,
there were over 100 million Ether in circulation.
So Ethereum does
not have the same scarcity as Bitcoin does.
After hearing about the mining process,
you might be asking to yourself,
is it even worth it to mine at all?
As an individual Miner, no.
It's really not worth it and it's not
even possible on your individual computer,
the computers that we're using at home on a day to day.
The only way to be able to really mine effectively
is to have a custom CPU and custom hardware.
This is really where the emergence of Mining Pools come from.
Mining Pools are going to be pools
of individuals that come together and have
really complex hardware that can run these intense searches.
One less thing to note about mining for now,
with Crypto-currencies like Bitcoin and Ethereum,
it is likely that most Miners are part of
these mining pools and not working as individuals.
The pools are going to allow them to combine
resources and server firms with, again,
really sophisticated hardware and lots of
computational problems to solve these hashing problems.
Those are the principles of mining,
I obstructed talking about mining as it
relates to Bitcoin and Ethereum,
but the same principles generally
apply for any Blockchain Network.
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