Mining is peculiar in that is serves multiple goals.
On the one hand, it solves the problem of seeding the network with coins. Otherwise, how could you kick this off in a fair way?
Secondly, mining "solidifies" transaction blocks, which acts as transaction verification for the network. Mining basically acts as prevention of "double spending" of coins.
Finally, mining keeps the money supply scarce (necessary for any currency) because despite everything just being bits, you can't just fake new coins without expending enormous amounts of computing power -- you need to prove you've done the work by solving hashes.
The bitcoin wiki has pretty good technical explanations of all of this.
thanks for the info, i guess i was wondering if all the computational power was being used for some purpose like the SETI project. It sounds like at least part of it is used for maintaining the bitcoin network itself.
To answer that question, none of the computing power is used towards anything but verifying transactions and - the real work here - solving hashes to generate more bitcoins.
There's plenty of discussion on what this cloud-supercomputer could be doing in addition to its current task. Problem is, the nature of mining introduces several limits on the types of computational problems miners try to crack.
On the one hand, it solves the problem of seeding the network with coins. Otherwise, how could you kick this off in a fair way?
Secondly, mining "solidifies" transaction blocks, which acts as transaction verification for the network. Mining basically acts as prevention of "double spending" of coins.
Finally, mining keeps the money supply scarce (necessary for any currency) because despite everything just being bits, you can't just fake new coins without expending enormous amounts of computing power -- you need to prove you've done the work by solving hashes.
The bitcoin wiki has pretty good technical explanations of all of this.