Bitcoin mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions or blockchain. This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place.
From a technical point of view, mining process is an operation of inverse hashing: it determines a number (nonce), so the cryptographic hash algorithm of block data results in less than a given threshold.
Mining serves as two purposes:
- To verify the legitimacy of a transaction, or avoiding the so-called double-spending;
- To create new digital currencies by rewarding miners for performing the previous task.
The amount of new bitcoin released with each mined block is called the block reward. The block reward is halved every 210,000 blocks, or roughly every 4 years. The block reward started at 50 in 2009, is now 12.5 in 2018, and will continue to decrease. This diminishing block reward will result in a total release of bitcoin that approaches 21 million.
Hash Rate, also Hash Power, is the measuring unit that measures how much power the Bitcoin network is consuming to be continuously functional. By continuously functional It means how much hash power is it consuming to generate/find blocks at the normal mean time of 10 minutes.
In the simplest terms, hash rate refers to the speed at which any mining device operates. Speed is important because cryptocurrency mining is really just a guessing game. Although the term “mining” suggests that it is a linear process with a start and a finish, like digging out a tunnel, it’s actually quite different. Without going too much into what mining is, what’s happening is each mining device is making thousands or even millions of guesses each second. The goal is to find the correct answer to the question that will solve the current block.
To put it simply, bitcoin and its SHA256 algorithm is considered by today standards to be relatively easy to compute. As a result, a mining device that is still relevant today would need to produce hashes in the terahash range and up.