How does bitcoin mining work?

How Does Bitcoin Mining Work?

How Does Bitcoin Mining Work?

Surely you have heard about Bitcoin mining, but how familiar are you with the process behind it? Although the word “mining” hints to manual labor, bitcoin mining actually isn’t a physical process that a miner does. To get started, you need a powerful computer, often called a “node”, that has bitcoin software installed and running, thus helping in the relay of information.

The software creates blocks of validated transactions and includes them in the blockchain, rewarding the miner with bitcoin and thus introducing new virtual coins into circulation. Bitcoins are mined in units called blocks. Blocks are linear, time-stamped series of transactions bundled together. Basically, they are like a public ledger, and it is freely shared, public and constantly up-to-date. The stronger your GPU (or ASIC) setup is, the more it can hash – take input data, process it, and return output data of a fixed size.

Numbers and fees

When bitcoin was first mined in 2009, one block was worth 50 coin (BTC), and today the value is around 12,5 BTC. Seeing as 1 BTC is currently worth about $8,000, mining one block would earn you around $100,000. At the time of writing this article, around 17 million bitcoins have already been mined, and bitcoin protocol estimates the total of 21 million can be mined. Once all bitcoins have been mined, the only task miners will have is verifying the transactions. For that, they will be paid by receiving transaction fees. It should also be mentioned that miners often join together to form Bitcoin mining pools in order to share their hashing power and increase their chances to be the one to first mine a new block and thus get the prize it brings.

Sure, now you know about blocks and blockchains and nodes and hashing, but what is bitcoin mining? Let’s say you have a $10 bill, you walk into a store and spend that money on bananas. You gave that bill away and there’s no risk you can reuse it. With digital currencies, that risk exists, someone can create a copy of the bitcoin and use it to buy two items in two different stores. That’s where bitcoin miners come into play. They work as auditors, verifying all the previous bitcoin transactions, hence preventing the so-called double-spending and keeping the users honest.

Bitcoin Mining Pools Distribution

Bitcoin Mining Pools Distribution


Bitcoin mining is an activity essential to the overall health of the network and something that can earn you a pretty decent income if you decide to take it up. There are some things you have to learn first, though. Some of them were explained here, but there is so much more to discuss. So, if you’re interested in giving this a shot, take a look at our other articles on the subject to learn everything you need to get started.

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Author: Ben Prescott

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