Bitcoin Mining – How Does Mining Work?

Bitcoin Mining – How Does Mining Work?

Bitcoin mining involves the creation of bitcoins and the verification of transactions on the blockchain. Bitcoin (BTC) is a decentralized cryptocurrency, launched by an undefined individual or group known as Satoshi Nakamoto in 2009. The blockchain records the transactions in a publicly accessible ledger. The blockchain is a collection of interconnected transactions for a certain period, called blocks. A network of Bitcoin nodes maintains each block, which includes several transactions. Nodes are computers that run Bitcoin software.

Mining establishes the security and integrity of the blockchain through a process involving solving complicated mathematical problems. The process of mining adds new transactions to the blockchain network and creates new bitcoins. The main function of mining is the process of verifying Bitcoin transactions and recording them into the public ledger. In the blockchain, the transactions are verified by Bitcoin users, which means by the participants of the Bitcoin network. Users who try to solve the puzzle and possess the required hardware and computing power are called miners.

How Does Mining Work?

Bitcoin miners engage in a competitive process to solve hard mathematical puzzles, known as proof of work. Every miner’s job is to solve mathematical problems, validate transactions, and earn a reward. It requires the use of expensive computers and a large amount of electricity. Every time someone sends bitcoins to another person, the Bitcoin network receives and transmits the transaction. Computers that run the Bitcoin software (nodes) check the transaction’s validity. Transactions are grouped into blocks by miners, who gather a specific number of transactions into one block. Each block contains a header (block version number), a list of transactions, and a nonce. Nonce is a random 32-bit number that miners use as a base for their hash calculations. 

Miners solve mathematical puzzles that combine the block header and nonce. Miners should use a large amount of processing power to earn their reward. Once the miner solves the puzzle, the solution is transmitted to the network. Nodes on the network can verify if the solution is correct. The winning miner receives a reward, which is currently 6.25 Bitcoins. New bitcoins are created and added to the circulating supply of bitcoins. The block is added to the blockchain when the miner’s block is verified and accepted by nodes on the network. After the block is approved by the nodes, the process starts again. 

Mining Pool

A mining pool is a group of individual miners that combines their computer resources. Each miner in the mining pool according to their hash rate contribution receives a portion of the reward. Mining pools are very popular because it is easier to earn Bitcoin when miners combine computing power. They have more reliable hardware, backup systems, and other features to ensure an uninterrupted mining process. This increases the chances of earning a consistent amount of income, even for small-scale miners. Mining pools charge a small fee (between 1% to 2%), to cover their operating costs.

Miners with a small percentage of the mining power have a small chance of finding blocks on their own. Joining a mining pool can provide access to more advanced mining software and tools. Many mining pools provide custom software that can help optimize mining performance. It is a good option for miners to join a mining pool, so the chance to earn bitcoins increases. However, miners should do their research and carefully evaluate the performance and reputation of any mining pool before joining.

The History of Bitcoin Mining

Bitcoin mining has been part of the cryptocurrency industry since Bitcoin was launched in 2009. Mining has changed throughout the years due to developments in technology, software, and network protocols. When Bitcoin came into use, the scaling process of transactions was not a problem. The transaction scaling process means the number of transactions for each block. In the beginning, the network was able to scale efficiently, by simply increasing the number of transactions per block. As the amount of transactions on the network increases, scaling has been one of the main issues in Bitcoin mining. However, as the network’s popularity grew, the scaling process became harder.

The Bitcoin network implemented a block size limit of 1MB (megabyte) in 2011. This limit specifies the maximum amount of data that each block can contain. Different groups recommended different solutions to the scaling problem. Bitcoin’s block size remains 1MB nowadays, but it is enough space to store over 200 transactions in a block.

Is Bitcoin Mining Difficult?

Bitcoin mining is difficult and a competitive process. It requires specialized technology and a lot of computing power to mine a Bitcoin block. The Bitcoin network itself controls the level of difficulty for mining a block. Miners compete with each other to solve a challenging cryptographic puzzle and become the first to add a new block to the blockchain. The current reward for mining a block is 6.25 Bitcoins. However, the cost of mining can vary based on elements like hardware costs and energy consumption.

Miners are essential in maintaining the security and integrity of the network. The difficulty level of mining Bitcoin has increased over time as a result of network change. This is due to different factors, such as the increasing number of miners on the network. Despite the challenges to enter this industry, bitcoin mining remains essential to the cryptocurrency industry. It ensures the security and integrity of the blockchain network.

Bitcoin (BTC) Mining Difficulty Over the Years

Bitcoin (BTC) Mining Difficulty Over the Years. Source: BitcoinKE

What Do You Need to Start Bitcoin Mining?

The Bitcoin mining industry requires specialized tools: 


The process of mining will require a Bitcoin wallet. Miners need to store their earned Bitcoin once they have successfully mined a block of transactions. The ability to transfer, receive, and keep Bitcoin securely is possible through Bitcoin wallets. Wallets are important for miners, they would not be able to obtain the Bitcoin reward for their work without a wallet. Moreover, miners need to use their wallets to pay for mining expenses, such as equipment upgrades or electricity costs. 

Mining Software

There are a lot of providers for mining software, which can be downloaded for free. It also can run on Windows, MAC, Linux computers, and other operating systems. Mining software is responsible for transaction verification, monitoring hardware, and solving cryptographic puzzles. It verifies transactions and ensures that they follow the rules of the Bitcoin network. It makes sure a miner’s hardware is operating effectively and correctly. Also, it performs mathematical calculations that are used to solve cryptographic puzzles. Some examples of Bitcoin mining software: CGMiner, BFGMiner, EasyMiner, BitMinter, and CGWatcher.

Mining Hardware

Bitcoin mining requires a powerful computer which consumes a lot of electricity. The hardware part is the most expensive part of Bitcoin mining. The hardware expenses can run from $500 to tens of thousands of dollars. There are two main types of Bitcoin mining hardware: ASIC and GPU. Manufacturers create ASICs (Application-Specific Integrated Circuits) as specialized chips for the mining process. Miners can utilize computer parts known as GPUs (Graphics Processing Units) for Bitcoin mining.

Drawbacks of Bitcoin mining

When considering starting Bitcoin mining, one should take into account some drawbacks that need to be considered. Those drawbacks of mining are usually financial and regulatory. Engaging in Bitcoin mining poses a financial risk as there is no guarantee of profit. Miners spend time and effort purchasing hundreds or thousands of dollars and have no return on their investment. It is also recommended that before starting Bitcoin mining, research the country’s regulations. Bitcoin is not legal all over the world, which means that mining could be illegal. The high energy consumption by the computer system executing the mining algorithms is another issue. Disposing of outdated mining hardware can contribute to environmental damage too. For example, the production of ASIC chips using carbon harms the environment. Mining could be a risky process that costs a lot of time and money.

How Much Could You Earn by Bitcoin Mining?

The earning from Bitcoin mining depends on several factors. It could be the price of Bitcoin, the cost of electric power, and the efficiency of mining hardware. When Bitcoin was launched, the reward for mining a block was 50 Bitcoins. However, the reward is halved every four years, and currently, it is 6.25 Bitcoins per block. Now, the price of one bitcoin is around $29,897.32  and miners can earn about $300 per day. However, it is important to remember that mining profitability is related to quick changes (volatile nature) in bitcoin prices. The effectiveness of the hardware that the miners are using, determines the profit that they would earn. Also, the change in electrical power price can reduce earnings from Bitcoin mining. It is important for miners to constantly monitor their earnings and adjust their mining techniques.

What is the Role of Miners in the Bitcoin Global Network?

The Bitcoin global network can not function without miners. They are responsible for verifying and adding new transactions to the blockchain, a decentralized database that stores all Bitcoin transactions. Miners compete to find the solution for challenging mathematical puzzles that allow them to add a block of transactions to the blockchain. The mining process also contributes to the Bitcoin network’s decentralization. Miners compete to solve the mathematical challenges and complete the Bitcoin mining process. This means it is not just a single entity that would control the verification process or manipulate the blockchain. Moreover, this makes Bitcoin transactions safer and more secure. Despite the difficulties, mining is important for the network. Without miners, the verification of transactions and the preservation of the blockchain’s integrity and security would be impossible. Miners will continue to play a crucial role in the security of the Bitcoin global network as it expands and changes.

Is Bitcoin Mining Legal?

Bitcoin mining legality varies depending on the country and rules of that nation for cryptocurrencies. Most countries around the world legalize it and consider it a legitimate business activity. However, several countries ban or do not allow mining Bitcoins. For example, numerous nations, such as Algeria, Bangladesh, Bolivia, and Pakistan, ban Bitcoin mining. Before beginning any mining operation, it is important to confirm the laws and guidelines of mining. While some countries prohibit Bitcoin mining, there are many other countries where this industry is legal. For example, Canada, the United Kingdom, and the United States consider Bitcoin mining as legal. Overall, the use of Bitcoin and the mining industry remains legal in the majority of counties.


  • Mining is the process of creating bitcoins and verifying transactions on the blockchain.
  • Miners are called the users that try to solve mathematical puzzles and have the required hardware and computing power.
  • Miners are rewarded with a block reward, which is currently 6.25 Bitcoins.
  •  Mining pool is a group of individual miners that combines their computer resources.
  • Bitcoin’s block size is 1MB, but it is enough space to store over 200 transactions in a block.
  • Mining is difficult and competitive, it requires specialized technology and computing power.
  • Mining requires special tools: wallet, mining software, and mining hardware.
  • Drawbacks of mining are usually financial and environmental.
  • Earnings from mining are not stable, it depends on the price of bitcoin and electrical power and efficiency of hardware equipment.
  • The Bitcoin global network could not function without miners, they are responsible for verifying and adding new transactions to the blockchain.
  • Legality of mining differs depending on the country and the rules of that nation for cryptocurrencies.



About Valbona

I am a passionate and dedicated student studying Computing and Information Technology at an American university. With a love for reading, writing, and research, I possess technical and problem-solving skills. I have a vision to make a meaningful impact in the world of technology, I aspire to develop innovative solutions that improve lives and empower individuals in the digital age.