Earnity, Domenic Carosa, & Dan Schatt: Why Does Bitcoin Need Miners?

Gold miners exist because people want gold, and most gold is, unfortunately, deep in the earth. Similarly, bitcoin has miners because people wish to own bitcoins. However, Earnity’s industry experts, Domenic Carosa and Dan Schatt, believe it is essential for crypto business owners to understand precisely how a bunch of bitcoins, tokens of an artificial invention, end up locked up in the circumstances necessitating mining.

Domenic Carosa and Dan Schatt think the term “mining” for bitcoin is a misnomer. Gold miners do not achieve anything other than the unearthing of new gold. On the other hand, bitcoin miners provide a valuable service to the Bitcoin network: decentralized transaction recording and validation.

The term “mining” in blockchain refers to the computational work that nodes in the network perform in the hopes of earning new tokens. In reality, miners receive compensation for their work as auditors. They are in charge of determining the legitimacy of Bitcoin transactions to keep Bitcoin users honest. So, by verifying transactions, miners help to prevent the “double-spending problem.”

Double Spending

Because of double spending — a particular problem inherent in any digital currency system — Bitcoin relies on miners to validate and record transactions. It is the high-tech incarnation of counterfeiting.

A case of double-spending occurs when a Bitcoin owner spends the same bitcoin twice. Though counterfeit money is possible, it is not the same as spending the same dollar twice. However, with digital currency, Earnity’s industry experts Domenic Carosa and Dan Schatt emphasize that there is a risk that the holder could create a copy of the token and send it to another party while keeping the original.

So, to address this issue, Bitcoin creators devised a system of network interactions, known as a protocol, that compares each potential Bitcoin transfer to a public ledger known as the blockchain. A thief can try to resend previously spent bitcoins until they are blue in the face. But, if those transactions do not check out, miners would not record them, and the community is spared from the attempt at fraud.