How does Bitcoin mining work?

bitcoins on the left and title of bitcoin mining on the right, black and white.

The fluctuating value of bitcoin(BTC) has interested many people in the ownership of the bitcoin.

For the past few years, we have all heard about this mystical currency that could bring you abundant wealth with its exchange value. The large exchange value in dollars created such a wave of popularity that everyone is now obsessed with it.

It does not exist physically, so it is very difficult to possess it. This reality is so unnatural that we want to have it but cannot believe in it. It’s like pulling and pushing at the same time. 

Why? And, how? These two questions need to be simplified before it creates more confusion. So, we are here to discuss what Bitcoin is? How does Bitcoin mining work?

Nature of Bitcoin

Bitcoin mining is carried out on the screen background, which is blurred, and a bitcoin is held between the thumb and index finger on the left side of the screen.

There are few terms related to bitcoin that are always repeated in the explanation. These technical terms add value to the description of the currency and are as follows.


Cryptocurrency is a virtual currency that doesn’t need any third-party governing or controlling its transaction. It works in the principle of blockchain technology.

A string is derived by cryptographically hashing the values of important data to be transferred. That string is used as the unit of currency. The values may be contracts, important documents, or products’ ownership data. 

The distributed ledgers among all the users do verification of the authenticity of cryptocurrency. Security is managed by brute-force comparison between every ledger, leaving the odd out as dysfunctional and fake.

Again, brute-force comparison is a one on one comparison. You need to understand the meaning so that we are on the same page.

Bitcoin, dogecoin, ether, monero, litecoin are some of the popular cryptocurrencies.


A peer-to-peer network is a communication network where two or more computers share resources and files.

Blockchain is a system where transaction records of cryptocurrencies are maintained across many computers in a peer-to-peer network. These records are in the form of linked ledger string data. A string tells the source and value of a particular transaction.

The link between the blocks of data is validated by the standard hash value, which is the same and only one for each transaction.

Decentralized blockchain is not influenced by a person or an organization and is immutable. The data are stored once and can be viewed by all.

You will understand the meaning of decentralized in the following section. For now, you can understand that blockchain technology came into interest with the development of bitcoin, and all major cryptocurrencies are heavily based on blockchain.

Decentralized authority

Money has been managed by a central authority from always. We don’t know how they conduct all the commercial transactions between countries. There are no transparency or security guidelines in transferring our hard-earned money to some business assets, stocks, or even gold. We believe in government.

Blockchain technology has introduced and even proved that we don’t need any mediator to have a successful transaction and commercial activities. We can trade anything with anyone in any part of the world using bitcoins and shouldn’t answer to any authority.

The decentralized authority system guarantees security to the highest level and makes the commerce of life work. It can be used as a new form of currency that is uniform around the world.

We don’t understand the technology completely, and it’s hard for general people to get a grasp of it. But the security is believable, and the system works. It is good enough for the mass population, but it is not acceptable to the dominant central authorities.

So, the decentralized authority system cannot be enforced in our life without mutual understanding between it and the government, the central authority.

Mining and miners

Mining is the process of entering new blocks into circulation. You should compute complex mathematical problems to perform mining. The goal is to find the nearest hash value to the target hash, which is very difficult. 

Miners are technically savvy people who are inclined to the economic benefit in the form of mining rewards. These rewards are crypto tokens which are also bitcoins. The payment is not uniform. You have to score them.


Nonce stands for “number only used once”. It is a number that can only be used once in a cryptographic transaction. That way, there are no chances of producing a duplicate block.

The nonce value is very hard to predict as it is responsible for the hash value. The hash value has some protocol to follow that should be exactly similar to the target hash. So, they are all connected. 

It is only this number that miners change to find out new genuine blocks.

Proof of work

Miners find a new block with the use of complex computation. This computation involves solving a mathematical problem, where a miner has to come up with an exact or nearly less than numeric value to the target hash value. The newfound hexadecimal number verifies the validity of the new block, which is added to the chain to make a new transaction. This cycle of actions is known as proof of work.

Bitcoin Mining

Bitcoin mining is the task of finding and adding new blocks to the blockchain. It is a sophisticated task for starters to understand mining but is quite simple with few installments and knowledge.

There is a ledger of all the transactions, which we know by the name blockchain. The unit where transaction data is held is known as a block.

A block comprises different input values like id, nonce, data, and hash value of the previous block. Comprising all these input values, a new hash is generated by the designated hash algorithm. This new hash is the identity of the block and is now added to the blockchain.

Miners who find a nonce value for the next legitimate block get a reward, and as the blocks in the chain are connected, reward comes in the form of commission from every transaction.


Every bitcoin is 1 megabyte of computer data consisting of 64 digits of hexadecimal code as a hash value.

It is estimated that the total number of possible bitcoins is 21 million. 18.5 million bitcoins have already been in use. 

An image of a person's movement in the stairs, going up and down at the same time, just like in bitcoin mining; an inverse relation.

Bitcoin mining decrease with an increase in time. And, the reward that miners get for bitcoin mining is reduced to half every 4 years.

In 2009, the reward was 50 BTC for every block found. In 2012, it was 25 BTC, in 2016, it was 12.5 BTC, and in 2020, it was 6.25 BTC. Now we know what it’s going to be in 2024. Yes, you are correct.

The number of new coins mined is also similarly in half ratio. It was 10.5 million in 2012, 5.25 million in 2016, and 2.625 million in 2020. It is decreasing, and the probability of finding new bitcoins is getting bleaker. So, the reward is decreasing, work is getting tough, and opportunity is also getting narrow. Is it going to end just in a couple of years? 

It is estimated or say known for a fact that the last bitcoin won’t be circulated until the year 2140. It is going to be with us for some time, I guess.

Quick Understanding

Imagine a long chain of whispers, that we pass through in a whispering game. If a person in the middle attempt to change a word or pronunciation of a word, all the receivers after that will have a false phrase. At last, when we backtrack all the answers, we know exactly where it went wrong.


The earnings of bitcoin miners are intriguing. It is natural for more and more people to get interested in a career as a miner as cryptocurrencies are getting popular. But there is a hefty cost to just get started and doubts in guarantee in return. Not everyone can become a successful miner.

Hardware and software

You will need powerful computational hardware to perform the mathematical calculations of hash. As you know, the competition is getting tougher day after day. More people are involved in the mining business, and bitcoin mining work is limited, for there are limited bitcoins to be mined.

You have to arrange an expensive mining rig with computer components like Application-Specific Integrated Circuit(ASIC) and Graphic Processing Unit(GPU). They cost thousands of dollars.

After hardware setup, you must download the necessary software that will connect to the blockchain. The software basically distributes the workload for the miners. There is much free software for bitcoin mining.

Now, you can get started with the job to get your proof of work. But, there are so many dedicated companies involved in the mining business, so it is quite vague to get started in the first place. How can it be overcome?

Well, we have a common ground to conquer, mining pools.

Affiliation in mining pools

A mining pool is a setup where individual miners contribute with their computational power to get a result faster. There is a manager who manages these pools for a fee.

The participant competes for the proof of work together and shares the benefits equally no matter who earns it. Obviously, you will have less profit if you have to share it with others. But in this way, your chances of earning are secured and stable.

It is estimated that a new block is validated every 10 minutes. There is a difference in the probability of finding a new block for a computer working to solve a million problems or million computers to solve one problem.

Crypto criticism

Bitcoin mining is a sophisticated task overall. You are working opposite to the usual norms of commerce. You cannot spend the bitcoin to buy groceries, not yet not everywhere. Governments are still skeptical about their influence. People are only interested in its equivalent value rather than in its value in changing archaic methods of transaction. There are distributed views.

It is in the rights and power of us, you and I, to make space for the new values of cryptocurrencies. We must debunk all the fallacies and keep a comprehensive understanding of how actually does bitcoin mining work.

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