Help Me get this straight :)

[OneWolfIsRandom]

Hi everyone,

Recently I've dived head first into this whole "bitcoin thing," and now I have been tasked with writing a one page intro for a big tech site to their bitcoin mining testing article.  I have been doing a lot of reading and listening to others talk about bitcoin and how it all works/what mining actually is/does, and needless to say I want to make sure that my intro is correct .

Please correct any misconceptions on my part, and thanks in advance

The area where I'm not quite confident in my assessment of what is going on is in mining.  From my understanding, mining is the method through which bitcoins' release into circulation is regulated.  Every 2016 blocks, the difficulty is adjusted based on the network's total hashing power and can go up or down.  Currently the reward for successfully finding a block is 50 BTC, and will decrease over time to 0 BTC; however, the reward will be in that of transaction fees.  

All of the transactions throughout the bitcoin network are publicly recorded in a huge block chain, and mining uses proof-of-work problems to verify transactions in the block chains in addition to creating an every increasing legit block chain to thwart dishonest users because the longest block chain is the one that the network will give priority/treat as the "most legit" record of transactions when presented with differing records/chains.

So.. is mining trying to find the hashed transactions within a block to add them to the block chain... or is it creating new blocks out of nowhere/independently of any Bitcoin network transactions?  I understand how mining is releasing coins into circulation; however, what will it actually be doing once all coins are release, e g what will the program actually be doing/working on?

Thank you for your help in clearing up my confusion  I apologize if this doesn't make sense and/or for typos.. I'm really tired!

EDIT: actually, I just found this (http://forum.bitcoin.org/index.php?topic=7269.0) and it may confirm some of what I was thinking.  I read this yest. but must've missed the line about mining and the 50 BTC being a /reward/ for verifying the block chain (I was unsure if these 50 BTC were being found you see).  Anyway, discuss on, tia

[JoelKatz]

So.. is mining trying to find the hashed transactions within a block to add them to the block chain... or is it creating new blocks out of nowhere/independently of any Bitcoin network transactions?

Either. If a miner can create a valid block, it will be added to the public chain unless someone produces a longer chain. He can include valid transactions in the block or not as he wishes. Typically, miners will include as many transactions as they had when they started work on the work unit.

I understand how mining is releasing coins into circulation; however, what will it actually be doing once all coins are release, e g what will the program actually be doing/working on?

The same thing, nothing will change. Where there use to be a 50, there will now be a 0.

EDIT: actually, I just found this (http://forum.bitcoin.org/index.php?topic=7269.0) and it may confirm some of what I was thinking.  I read this yest. but must've missed the line about mining and the 50 BTC being a /reward/ for verifying the block chain (I was  nsure if these 50 BTC were being found you see).  Anyway, discuss on, tia

The 50 BTC is the reward for mining the block. In a sense, you can say it's a reward for verifying the block chain because you can only include verified transactions in the block. But you don't have to include any transactions at all. However, you would be wise to at least verify that all prior information was valid, otherwise even if you mined a block, it would never get accepted by anyone else.

[OneWolfIsRandom]

Thanks for the quick reply.  hmm.. I guess what I'm most uncertain about now is the relationship between transactions and blocks.  There is not a set number of transactions per block, right?  So blocks are made of transactions (that are made of a hashed key pair).  These blocks' transaction data builds upon all previous blocks' information in a block chain.  Is there anything else to a block aside from a list of transactions?  The bitcoin wiki could do with some shiny infographics hehe

[JoelKatz]

Thanks for the quick reply.  hmm.. I guess what I'm most uncertain about now is the relationship between transactions and blocks.  There is not a set number of transactions per block, right?  So blocks are made of transactions (that are made of a hashed key pair).  These blocks' transaction data builds upon all previous blocks' information in a block chain.  Is there anything else to a block aside from a list of transactions?  The bitcoin wiki could do with some shiny infographics hehe

The block consists of a header and some number of transactions. Every block will include at least one transaction, the coinbase transaction that directs the 50 bitcoins for mining the block to the appropriate account. If you click on a block in blockexplorer, you can see it in raw form, like this:
http://blockexplorer.com/rawblock/00000000000008837c0f5a9ba13c902acb84dbc5327bfe1b1954498b7fa1c3ad
The 'nonce' is the field the miners try to find.
You'll notice the 'hash' field starts with an absurd number of zeroes.

[OneWolfIsRandom]

Ah, okay, interesting  Thanks for clearing that up.

I'd like to thank you guys for helping me out in getting this bitcoin stuff straightened out  The article is now live and I welcome any helpful critique  Keep up the great work and community!

the article in question: Bitcoin Currency and GPU Mining Performance Comparison