Hash

We aren’t talking about the good stuff you’d expect to find in Amsterdam but rather the good stuff that is responsible for processing transactions on the Bitcoin blockchain.

You actually use hashes when you send emails and browse the internet – they are a key part in encrypting your online activity and providing security. One example is the padlock next to the website address at the top of this page.

For Bitcoin, hashes are a complex mathematical equation that ASIC miners need to solve in order to create a new block of transactions. The more hashes they solve before the next block, the more Bitcoin rewards they get.

This is a simplified description of events but cryptography is a complex beast. You won’t need to know the ins and outs of cryptography unless you are a Bitcoin developer.

The solving of hashes is where the bulk of energy consumption comes from with Bitcoin as it’s part of it’s protocol called “Proof-of-Work”. It takes work to secure the network and this requires investment for setting up mining rigs, paying for electricity on the free market to power the miners and setting up green infrastructure to keep the miners operational and profitable.