You mightn't need such an explanation, but here's an explanation of why bitcoin mining works.
Essentially, in all currency systems there must be money that is created in order to keep the system afloat. If we have a currency system that has no new money created, then eventually financial distribution will die where one party has more money than every other party, and the only way to "bridge the gap" between rich and poor would be to have the rich give away their money, which is unlikely. Essentially, if you can't bring new money into a currency system, then that currency system will eventually die.
That said, you can't bring too much money into the currency system either. Money is about an "idea", currency itself doesn't really exist, a dollar bill has no more value, really, than a piece of paper with the same dimensions. It's what the dollar bill represents that gives the dollar it's value, and what the dollar bill represents is dependent on the people. If you have trillions and trillions of dollar bills, then the "dollar" will not actually have that much value, because everyone has a dollar and there's so many dollar bills! Such a phenomena is known as inflation, and it happens a lot in most modern currencies including Germany, in which the Mark (the German dollar at the time) was so inflated that it was used as TRAIN fuel because it was cheaper to burn the Mark than paper. In the United State right now, the penny is actually worth less than the material that is used to make that penny, simply because there's so many pennies and demand for the penny is low.
The United States tries to conflict both these properties by having an external body control how much money gets introduced into the currency system at a time, attempting to make sure that the currency doesn't get inflated and yet is still spread around in number. The system the US has right now is under a lot of controversy, while it does generally work, some people claim it leads to a high chance of corruption and a there have been blunders in history where the entire US system has fallen apart due to it, most recent scenario is the Global Recession.
So Bitcoin doesn't use that system, bit coin needs to have a different system that allows new money to be introduced into the currency, without having too much money being introduced. Their method is what is known as a "proof-of-work" method, essentially what it means is that people who do more work in completing a task, will get more money. The more people who complete the task (and hence the more money being introduced) the harder the task becomes (to avoid inflation). This way you can get a self-sustained system that generally keeps a balance of the money coming in and the money coming out. You must remember that bit coins are simply a number, when someone completes a task the bit coin number goes up by 1, they get an extra bit coin. There's no actual "mining" or finding bit coins in some way, the program that manages bit coins just gives people who complete certain tasks, more bit coins.
The task in question is deciphering a block that is "hashed". Hashing essentially means you represent SOMETHING in a particular way, where you can get the original thing from the hash and at the same time can't know what the thing is without knowing how it was hashed. It's essentially encryption. The trick is the program is compiled in such a way that whenever someone finds the value they were looking for in the hash, in doing so they've actually rehashed the block, and another person needs to find another value in the newly hashed block. It's a self-consistent method where everyone who solves the problem also makes the problem harder for people to solve next. There's also central algorithms with the bitcoin manager that assures that the hashing values are difficult enough to not cause inflation and yet are easy enough to be accessible.
There is a problem, these solutions are done by computers, not by humans, so it's generally "whoever has the best computer gets the most bitcoins". It's actually an interesting idea, because computers evolve so rapidly that by the time someone has a super powerful computer mining bitcoin, an even better computer is probably in the works. The only way you could be "top" is if you kept getting the latest hardware, which would be more costly and timely than the actual bitcoin you receive. So the system is good in a way, because it means someone can't be the "best miner" for very long, and bitcoin is such a vast network that thousands of miners can be mining profitably all at once.
Topic: bitcoins??? (Read 1087 times)