The Mining Mechanism: How New Cryptocurrencies Are Inserted into the Blockchain

Unlike the traditional financial system, where central banks control the printing and distribution of fiat currency, cryptocurrencies use a decentralized model for creating value. The introduction of new units into the system occurs through a process called mining - a predefined mechanism that validates transactions and simultaneously rewards those who perform this work.

How Mining Maintains the Integrity of the Network

Mining is much more than just generating new coins. Miners, also known as mining nodes, act as guardians of the integrity of the blockchain. Their responsibility is crucial: to collect unconfirmed transactions from the memory pool, organize them into a candidate block, and validate them according to the rules predefined by the underlying protocol.

Each protocol establishes its own rules, but it is the consensus algorithms that define how these rules will be applied. In the case of Bitcoin, this algorithm is called Proof of Work - a system that requires miners to solve complex mathematical problems to validate blocks.

The Process: From Collection to Block Validation

When a miner starts his work, he begins by selecting unconfirmed transactions. The first transaction he records is special - it is called a coinbase transaction, and it is exactly where the miner sends himself the block reward as compensation for his efforts.

After the transactions are gathered, each one goes through a hash function. The results (outputs) are then combined in pairs and processed again. This iterative procedure continues until only a unique hash remains - what we call the Merkle tree root (raiz da árvore de Merkle).

This root is then combined with the hash of the previous block, a pseudo-random number called nonce, and other parameters. This entire set is subjected to a hash function, generating the hash of the candidate block.

Proof of Work: Trial, Error, and Reward

Here is the challenge: the hash of the produced block must be below a predetermined target. Since the result of each hash is practically unpredictable, miners need to test countless different combinations of nonce to find a valid hash. It is a trial-and-error process that requires significant computational power.

The first miner to discover a valid hash is able to validate their candidate block and receives the block reward. The successful hash serves as cryptographic proof of their work - hence the algorithm is called Proof of Work.

On average, this entire cycle takes about ten minutes. After validation, the block is added to the blockchain and all miners start the process again with the next block.

The Reward Structure: Controlled Value Creation

The reward offered to miners is not arbitrary. The Bitcoin protocol defines exactly how much will be granted, and this value decreases predictably: every 210,000 blocks (approximately every four years), the reward is halved.

Initially, when Bitcoin was launched, the reward was 50 BTC per block. Currently, after successive reductions, this value is at 6.25 BTC. This predefined issuance system ensures that Bitcoin has a finite and predictable supply, unlike fiat currency which can be printed as needed by central authorities.

Each confirmed block receives a unique identifier - its own block hash - which makes it immutable within the chain. Thus, mining not only creates new coins: it builds the security, transparency, and reliability that make blockchain possible.