Blockchain & mining
A blockchain is a shared record of transactions that many computers keep in sync. These guides explain how blocks, nodes, mining and proof of stake work. Each block stores a link to the block before it, so changing an old transaction would mean redoing every block after it. Learn how networks agree on new blocks, why confirmed transactions are very hard to reverse, what a fork is, and how Bitcoin mining works and where it is restricted. Short glossary entries explain words such as hash rate, mempool and confirmation.
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How does a blockchain keep its record safe?
Every node checks new transactions against the same rules, and keys prove who owns what. Because the record is public, transactions can also be traced.
How do mining and staking work?
They are two ways a network chooses who adds the next block. Proof of work uses computing power, proof of stake uses coins locked up as collateral, and mining rules differ by country.
Key terms
- Hashing Hashing is the process of turning any data into a fixed-length code, called a hash, with a one-way function that cannot be reversed.
- SHA-256 (Secure Hash Algorithm 256-bit) SHA-256 is a cryptographic hash function that turns any input into a fixed 256-bit fingerprint, written as 64 hexadecimal characters.
- Mempool The mempool (memory pool) is the waiting area where each Bitcoin node holds valid transactions that have not yet been confirmed in a block.
- Confirmation A confirmation is the inclusion of a transaction in a block.
- Difficulty Adjustment Bitcoin's difficulty adjustment is an automatic rule that makes mining harder or easier every 2,016 blocks so new blocks keep arriving about every 10 minutes.
- ASIC (Application-Specific Integrated Circuit) An ASIC (application-specific integrated circuit) is a chip built for one task.
- Miner Capitulation Miner capitulation is when Bitcoin miners, squeezed by falling prices or rising costs, switch off machines and sell some of their bitcoin.
- Cloud Mining Cloud mining is renting crypto-mining hardware, or a share of its hashpower, from a company that runs the machines in its own data center.
- Lightning Network The Lightning Network is a layer-2 network on top of Bitcoin that lets people send bitcoin payments through payment channels without waiting for block…
- Block Explorer A block explorer is a website that lets anyone search a public blockchain and see its blocks, transactions, addresses and balances.
- Block Reward A block reward is the payment a miner receives for adding a new block: newly created coins plus the transaction fees in that block.
- Hash Rate Hash rate is the number of hash calculations that miners on a proof-of-work network, such as Bitcoin, perform every second.
Frequently asked questions
What is a blockchain?
A blockchain is a shared record of transactions that many computers keep in sync. New transactions are grouped into blocks, and each block stores a cryptographic link to the block before it. Changing an old transaction would mean redoing that block and every block after it, which the rest of the network would reject.
What does crypto mining do?
Mining is how proof-of-work blockchains such as Bitcoin add new blocks. Miners use specialized computers to find a block that meets the network's difficulty target. The miner who succeeds adds the block and collects the block reward: newly created coins plus the fees paid by the transactions in that block.
What is the difference between proof of work and proof of stake?
Both are ways for a network to agree on the next block. Proof of work relies on computing power and electricity, as Bitcoin does. Proof of stake relies on validators who lock up coins as collateral, as Ethereum has done since September 2022.
Can a blockchain transaction be reversed?
Usually not. Once a transaction is confirmed and more blocks are added after it, it is effectively final, and there is no central party that can refund it. That is why you should check the wallet address and the network before you send crypto.
Is crypto mining legal?
It depends on where you live. Mining is allowed in many countries, but some restrict or ban it, and the rules can change. Check the current rules in your country before you start.
