Merit is different. It focuses on community, being easier-to-use, and being approachable by people with all technical and financial backgrounds. One of the major innovations in the Merit protocol is its approach to mining. Whereas other digital currencies only focus on the importance security, Merit considers both security and stewardship in its approach to mining.
For the uninitiated, digital currency (or cryptocurrency, as some like to call it) can be a confusing. There are a number of foundational elements that must be understand, and one of them is mining. A supermajority of today’s digital currency rely on mining to produce new currency and to maintain the security and integrity of the network.
Before going deeper into mining, we must first understand the fundamentals of Blockchain. The term blockchain comes from the notion that data in the network is stored in blocks. These blocks are stored sequentially by all the peers on the network. All of the transactions that have occurred on the network are stored in this sequential order of blocks, in a data structure called the blockchain.
The primary innovation of blockchain technology is that, unlike traditional systems, it does not rely on a central authority In a typical web-based (or desktop) application ecosystem, a central party (the developer of the application, usually) will host servers, and users will simply access them. This reliance on a central resource has some potential short-comings that blockchain aims to eliminate: namely trust and security. Users must trust that this third-party has (and will always have) good intentions and their best interests in mind. Further, this central authority is a single point of failure. All users are relying on this third-party to secure their data.
The power of Blockchain technology is that it does not rely on a central authority. Instead, a decentralized network of peers power the network collectively. Each peer (computer) stores a copy of the blockchain, and does its own verification to ensure that that the data has not been tampered with. This is where mining comes in. Essentially, mining is the mechanism that ensures that it is not easy to falsify data on the blockchain. Each node must engage in a computationally-intensive task in order to create a new block, and a lottery determines the winner.
The fundamental premise behind mining is strength in numbers. If there are many peers on the network that are engaged in mining, it makes it extremely unlikely for a bad actor to successfully falsify data on the blockchain. Another way to think of this is as though all the computers on the blockchain are acting as one big supercomputer together. A bad actor would have to have more computing power than the rest of the network combined in order to effectively fool the network into thinking its data is valid.
So far, the description of mining does not really bring to mine the classic notions of ‘striking gold’ that most of us associated this term with. So, why call it mining? Because human nature suggests that the network needs an incentive to engage in a behavior like this. After all, electricity is not free, and having one’s computer engaged in security computations all day can be an inconvenience.
As such, digital currencies provide a reward to at least one miner each time a block is issued. This was one of the primary innovations in Bitcoin. Each member of the community has an incentive to help secure the network.
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