How Does Bitcoin Mining Work?

March 12th, 2018

When most people hear the term “mining”, they imagine coins being dug out of the ground, however Bitcoin mining is completely different- there isn’t any physical “mining” that takes place. So why is it called mining in the first place? The process of Bitcoin mining is very similar to gold mining. Just how gold exists underground, Bitcoin exists in a design that must be “solved”. Bitcoin protocol stipulates that 21 million Bitcoin units will exist at some point. Miners from across the globe have the responsibility to bring forth these Bitcoins. In this way, both gold and Bitcoin mining are similar.

Miners get Bitcoins as reward for creating blocks of valid transactions and including it in a public ledger called a blockchain. Mining is done by using specialized computers and advanced systems that have been created for this purpose. As Bitcoin grows in popularity, many Bitcoin enthusiasts want to give “mining” a try.


In order to understand the entire process of Bitcoin mining, it’s important to first understand the main terms that are used. Nodes are powerful supercomputers that run Bitcoin software and allow digital currency to run smoothly by participating and relaying information.

Running a node is easy, basically anyone can operate it. All you have to do is download the free software while leaving a few ports open. The only issue you may face is that this consumes massive amounts of storage space and energy. Nodes assist in spreading Bitcoin transactions over the network. A node will send out information to other nodes that it knows, this process will continue until it goes through the entire network.

Some nodes are “miners” or mining nodes. The task of these groups is to create blocks of transactions and add them to the blockchain. This is done by solving complex mathematical equations (which is part of the Bitcoin design). The puzzle they must solve is to find what number, when used with data and passed using a hash function, produces a result within a certain range. While this process may sound, easy-it is far from it.

Solving the Puzzle

Miners must guess a mystery number and apply fresh hash function in order to get the “right” guessed number into the data in a block. They must make sure that the resulting hash starts with a pre-established number of zeros. It’s difficult to guess which number will work because two integers will give varied results.

The first miner who is able to get the resulting hash with the desired range, then announces his “victory” to the rest of the mining network, so that the other miners will stop working on that block and move to the next one. The miner that solves this equation is reward with a new Bitcoin for all his hard work.


The current reward for miners is 12.5 Bitcoins-which is huge. However, there are numerous mining nodes competing for the reward. The mining “game” is all about computing power and some luck(to some extent). The key is to perform more guessing calculations in order to get a better chance to win Bitcoins.

The cost of mining nodes needs to be considered before beginning. This hardware is made for more powerful and faster processing, so if you’re going to mind you should invest in the best node model available. The faster and more powerful your “rig” is the better chance you have of find the correct number before the competition does. These machines consume a massive amount of electricity, so make sure that your investment is worth it.

According to experts, the number of Bitcoins that each miner receives a reward will continue to decrease as time goes on. Currently it is at 12.5 Bitcoins, every four years it is halved. Another critical factor is that the price of electricity and hardware could go up in the next few years to compensate this reduction.

The last Bitcoin is expected to be mined in 2150. If you want to be part of this mining community, there is no better time to start then now.

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