Mining is the process of spending computing power to process transactions, secure the network, and keep everyone in the system synchronized together. It can be perceived like the SatoshiFX data center except that it has been designed to be fully decentralized with miners operating in all countries where no individual has control over the network. This process is referred to as "mining”. It is an analogy to gold mining because it is also a temporary mechanism used to issue new SatoshiFX tokens. Unlike gold mining, however, SatoshiFX mining provides a reward in exchange for useful services required to operate a secure payment network. Mining will still be required after the last SatoshiFX is issued.
SatoshiFX Mining software listens for transaction broadcasts through a peer-to-peer network and performs appropriate tasks to process and confirm these transactions. SatoshiFX miners perform this work to earn transaction fees paid by users for faster transaction processing; and newly created SatoshiFX tokens issued into existence according to a fixed formula. For new transactions to be confirmed, they need to be included in a block along with mathematical proof of work. Such proofs are very hard to generate as there is no way to create them other than by trying billions of calculations per second. This requires miners to perform these calculations before their blocks are accepted by the network and before they are rewarded. As more people start to mine, the difficulty of finding valid blocks increases as the network increases to ensure that the average time to find a block remains equal to 10 minutes. As a result, mining is a very competitive business where no individual miner can control what is included in the blockchain.
The proof of work is also designed to be dependent on the previous block, forcing a chronological order in the block chain. This makes it exponentially difficult to reverse previous transactions because this requires the recalculation of the proofs of work of all the subsequent blocks. When two blocks are found at the same time, miners work on the first block they receive and switch to the longest chain of blocks as soon as the next block is found. This allows mining to secure and maintain a global consensus based on processing power. SatoshiFX miners are neither able to cheat, by increasing their own reward, nor process fraudulent transactions that could corrupt the SatoshiFX network: because all SatoshiFX nodes would reject any block that contained invalid data as per the rules of the SatoshiFX protocol. Consequently, the network remains secure even if not all SatoshiFX miners can be trusted.
Mining is the process of spending computing power to process transactions, secure the network, and keep everyone in the system synchronized together. It can be perceived like the SatoshiFX data center except that it is designed to be fully decentralized with miners operating in all countries, and no individual having control over the network. This process referred to as "mining" is an analogy to gold mining because it is a temporary mechanism used to issue new SatoshiFX. Unlike gold mining, however, SatoshiFX mining provides a reward in exchange for useful services required to operate a secure payment network. Mining will still be required after the last SatoshiFX is issued.
Mining creates what is equivalent to a competitive lottery. This makes it very difficult for anyone to consecutively add new blocks of transactions onto the block chain. This protects the neutrality of the network, preventing any individual from gaining the power to block certain transactions. This also prevents any individual from replacing parts of the block chain to roll back their own spends, which could be used to defraud other users. Mining makes it exponentially more difficult to reverse a past transaction by requiring the rewriting of all blocks following the transaction that is desired to be rewritten.
In the early days of SatoshiFX, anyone could find a new block using their computer's CPU. As more and more people started mining, the difficulty of finding new blocks increased greatly to the point where the only cost-effective method of mining was to use specialized hardware. You can visit satoshifx.com for more information.