Mining and Nonce in Bitcoin

Introduction

This is part 2 of the Ethereum White Paper Simplified. You can check the part 1 here. Part 1 covers History, Proof of Work and Proof of Stake, State Transistion System of Bitcoin and UTXO.

To understand this part, part 1 is a prerequisite. So, do check it out before this.

or If you want to know basics of block chain, you can read this short article

Now let's get into this one.

Stage for mining

• The main motive behind Bitcoin is to build a decentralised currency system.
• We already saw how Bitcoin state transition system works in part 1.
• To make it secure and stable, we need a consensus system to ensure that everyone agrees to how state transition system making changes to bitcoin's state by adding transactions or simply the order of transactions.
• Let's see how a block looks like:

Here,

1. Time = Time stamp at which that block was created.
2. Nonce = A random number which is the heart of proof of work. ( more on this later).
3. Prevhash = The hashed value of previous block. Every block has hash of previous block to connect as a chain.
4. Transactions = List of transactions.

Mining

• In a block chain network, there will be thousands of nodes.
• Whatever exchange happens between the nodes in network is called a transaction.
• In case of bitcoin, it is just currency. But in case of other block chains like ethereum, it can be data, tokens (NFTs, contracts etc) that we can exchange on network.
• In the network, every node contains the image of block chains's current state.
• A new block is created or mined by miners whenever a certain number of transactions are done after the previous block was mined.
• This number changes from chain to chain.
• The time taken to create a new block from the addition of previous block to the chain is called block time.
• The block time for bitcoin is 10 minutes. It means, for every 10 minutes, a new block is added to the bitcoin block chain.
• Creation of a block is done by miners.

Task of Miners

• Miners are also nodes in the network but containing enough computational power to solve cryptographic puzzles.
• After a miner node creates a new block, it is sent to all other nodes in the network so that they can add it to the block chain in their machine.
• There will be multiple nodes competing to create/mine a block simultaneously.
• This is because the miner of a block receives incentive in exchange for their computational power.
• Whoever miner manages to create the block first gets the incentive and their block is added to the block chain.

Let's assume a scenario where all the nodes in the network have equal computational power and are trying to create/mine a block at a time.

Are all the miners manage to mine the same block at the end?

To find the answer to this, we need to know about Nonce.

Nonce

• Nonce is a pseudo-random number. It is pseudo-random because, once a number is used as nonce in a block, it is not used again.
• Hash value of every block is calculated so that it can be used in next block to chain them.
• According to proof of work, the hash of a block should start with a certain number of zeroes. This number changes from time to time.
• So, a miner node task is to hash a block such that the resulting hash is smaller than a variable number (2^187 , at the time of Ethereum white Paper was published. This also implies that it should have a certain number of zeroes at the starting of hash).
• Bitcoin uses SHA256 algortihm to hash the block. If by using SHA256, the miner couldn't get the hash value smaller than the given number, then the miner has to change the input.
• But we can't change the time, previous hash and transactions of a block. That is the reason why the concept of nonce was introduced.
• To change the input to achieve a hash with particular features, we need a variable in input. And nonce is that variable.
• So, miners keep applying SHA256 to the block buy changing the nonce value each time until they get a hash value less than a particular number.
• There can be multiple nonce values which can make this possible.

So, according to this, even if all the mining nodes with equal computational power try to mine at a time, they can mine different blocks having different nonce values as multiple nonce values are possible for same block to satisfy that zeroes condition.

Conclusion

That's a wrap for this article. Like and share this if it helped you some way.

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