What Is Bitcoin Mining?

Understanding How Bitcoin Mining Works

Understand how Bitcoin Mining works. Learn about the role of miners. Find out how new Bitcoins are minted and more.

Bitcoin explained. Understanding how Bitcoin works

How Bitcoin Mining Works

Bitcoin is digital currency based on cryptography principles. It runs on the blockchain network. Mining is the process of grouping transactions in units of Blocks and adding them to the blockchain. Every time a new block is added to the blockchain, new Bitcoins are released.

Bitcoin miners are integral to the functioning of the blockchain. The computational power that goes into ‘mining’ also keeps the Bitcoin Network secure.

The blockchain is a chain of blocks. Each block contains a record of previous transactions. Bitcoin mining is the process of validating new transactions and adding them to the blockchain. Validation ensures that the records tally. It also ensures that a lot of computation power is required to make any changes to the already validated blocks.  Each Bitcoin node keeps a true copy of the blockchain. And they keep adding only valid blocks such that the same copy of the blockchain is kept by all the nodes.

Video on Bitcoin mining. 

What is the Blockchain?

The blockchain is a shared ledger of transactions. Since it is open and shared and also decentralized it must be very secure, i.e. difficult to tamper. It takes approximately 10 minutes to validate each Bitcoin block. Blocks come in standard sizes of 1MB.

Bitcoin uses proof-of-work mechanism to validate blocks. This proof-of-work is verified every time the nodes add blocks to their copy of the blockchain. The longest blockchain with valid blocks is always considered as the true blockchain. Bitcoin uses SHA256 function to arrive at the proof of work.

Miners earn block rewards for successfully adding a hash code/string referred to as the proof-of-work. Block rewards are new Bitcoins that come in the transaction ledger. Miners also earn a transaction fee from all the transactions that are included in the block.

Miners put in the computational effort to find the required hash code/string. This hash code/string ensures the correct sequence of blocks formed. Every block that is to be formed has to be consistent with the already existing blockchain. This prevents double spending of Bitcoin. It also ensures the security of the blockchain as anyone wishing to tamper the records on the blockchain has to redo all the computational work attached with the blockchain.

Video explainer of the Blockchain

What is Bitcoin Mining Difficulty?

The SHA-256 hash that needs to be found has to be lower than or equal to the hash code included in the block’s header. To find it requires computational work and this is what mining difficulty is. In proof-of-work, we have the hash of a block to surely start with a certain number of zeros.

This difficulty is adjusted such that it almost takes 2 weeks to validate 2016 blocks. Which also, on average, comes to one block every 10 minutes.

As more miners join, the rate of block creation will go up. As the rate of block generation goes up, the difficulty rises to compensate the increased computational power. Any block that does not meet the difficulty level will not be validated and hence the computational world done goes to waste.

For complete transactional security, it’s recommended to wait for at least 6+ confirmations. As new blocks are made on an average of every ten minutes. the comes around to one hour.


Bitcoin mining resembles the same say how metals are mined and brought into existence. It happens at a predictable rate and diminishes over time. The Bitcoin is so designed that for every 210,000 blocks (~ 4 years), the block reward is cut by half. The original block reward was 25 Bitcoins and currently, it is 12.5 Bitcoins. At around 2140, all Bitcoins will have been generated. A total of 21 million Bitcoins would have been produced by then. The idea is that miners would be incentivized by the transaction fees that come with the blocks itself, to keep mining.

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