What problem did the bitcoin protocol solve? Before understanding what cryptocurrencies are, one must understand what the great invention is achieved by the technology.
The Byzantine Generals' Problem was a long-standing computer science math problem that was not solved until the advent of the bitcoin protocol. The protocol is the system that includes the bitcoin network and its various facets. The Bitcoin Network has many aspects but one of the most important aspects is to understand that it is an invention that has solved a long unsolvable computer science problem.
Mining cryptocurrencies is only part of what we do. The miners are individuals or groups of people that receive a fee in cryptocurrency paid by the network that they are mining on. For example, miners can mine bitcoin or any other proof-of-work (PoW) cryptocurrency using the proper type of computer hardware. Bitcoin miners receive payment by the protocol for using their computers to perform the encryption of Hash calculations. These are central to the validity of the cryptocurrency’s decentralized ledger as known as the blockchain. In bitcoin mining, for example, miners run computers to compete against each other in the great race to complete and confirm transactions on the network to gain the next reward that is issued by the protocol to the winner or winners. This is how currency is created on the bitcoin blockchain. The algorithm is code that mimics the diminishing returns of gold or precious metals mining, thus coined the term bitcoin mining.
A hash is a mathematical function that condenses data into a fixed size, on the bitcoin blockchain these are referred to as blocks. The bitcoin protocol is a hashing algorithm based on SHA-256 encryption. A bitcoin miner gains rewards from the bitcoin network for aiding in securing, verifying and performing calculations that maintain the validity of the decentralized network. The miners are the volunteers that commit their computer servers to a specific network to gain the potential rewards for their service. Simply put, the bitcoin blockchain is a decentralized database that cannot be hacked with current computer technology.
The difference between PoW cryptocurrencies vary. PoW protocol or function is the original consensus algorithm in the bitcoin network. In the bitcoin blockchain, this algorithm is used to confirm transactions and produce new blocks to add to the blockchain. The blocks are just packets of transactions that are confirmed on the network and secured from tampering with by SHA-256 elliptical curve encryption. SHA is the abbreviation for Secure Hash Algorithm. SHA-2 includes a significant number of changes from SHA-1.