What Is Bitcoin Mining? All You Need To Know

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Key Takeaways

  • Bitcoin mining is the process of validating transactions and adding them to the public ledger known as the blockchain.
  • Miners compete to solve complex mathematical puzzles, and the winner gets a block reward of new Bitcoins.
  • Bitcoin mining rewards decrease over time. This is written into the Bitcoin code and helps control inflation.
  • Mining requires a lot of computing power. Today, specialized computers called ASICs are most effective for mining.

The only way to send money electronically has always been to rely on a centralized intermediary like PayPal. For example, I load some funds from my bank account, or I get paid by another PayPal user, and then PayPal lets me send the money I have. The platform will only let me send what I have, and it will tell somebody else whether they have received money from me.

Bitcoin was created as a decentralized alternative to the banking system. This means the system can operate and transfer funds from one account to another without central authority. More often than not, the leading cryptocurrency has been called “digital gold” and is created through mining. But how does it all work? Let’s dig into that in this article.

What Is Bitcoin Mining?

Bitcoin mining is the process of securing and maintaining the Bitcoin network by validating transactions and adding them to a public ledger called the blockchain.

Bitcoins aren’t printed out like traditional money; they are mined out of the system. A miner is a person with a computer that runs a mining program on it.

It is called “mining” because, like any other natural resource, Bitcoin has a finite amount. The maximum number of Bitcoins that can be generated is 21 million. Until today, over 19.67 million Bitcoins have been mined.

How Does Bitcoin Mining Work?

Like real-world mining, you need to invest energy to extract these Bitcoins. These miners’ computers need to solve complex mathematical problems, and once they solve them, new Bitcoins are generated and awarded to the miners.

But miners don’t just generate new Bitcoins. They also use their computers to verify transactions and prevent fraud. So, more miners means faster transaction verifications and less fraud. That’s why we want to compensate miners for their hard work. 

When verifying a transaction, the miner gets a small fee for his work. So, the miners get paid twice: once for verifying the transactions and when they successfully generate new Bitcoins.

Bitcoin Mining Then And Now

Bitcoin mining has changed dramatically since its beginnings in 2009.


Back then, anyone with a regular computer could mine Bitcoin. Satoshi Nakamoto, the creator of Bitcoin, designed the mining algorithm to be CPU-friendly to encourage participation and distribution. However, this method quickly became obsolete as the network grew and higher-end mining equipment was needed.


When Bitcoin mining began in 2009, the block reward was set at 50 Bitcoins per block. Today, with Bitcoin coming up on April 20th, 2024, the reward is expected to be around 3.125 Bitcoin per block, which is still significant but much less than in the early days.


Before, Bitcoin mining was open to anyone with a computer. It was like the Wild West of digital gold rushes. Today, with the development of Application-Specific Integrated Circuit (ASIC) miners, mining has become much more centralized and professionalized. The high cost of these machines makes it difficult for regular miners to compete, and many just pool resources in “mining pools” to increase their chances of success.

Proof-Of-Work Consensus Mechanism

The foundation and integrity of all crypto blockchains are consensus mechanisms, ensuring that all records are accurate and truthful.

The original idea behind Bitcoin included decentralization, which required a method of transaction confirmation independent of financial institutions, and this is where Proof-of-Work originated as a response to this problem.

In technicality, Proof-of-Work is an algorithm or system that uses significant effort to deter or eliminate fake uses of computing power. It was designed to solve the problem of double spending, which, if unchecked, could be a major issue for crypto projects, but that’s a topic for another time.

Final Thoughts

We hope that you have found this base-level introduction to Bitcoin Mining to be helpful. If you would like to learn more about Bitcoin and cryptocurrencies in general, please visit our official social media channels and subscribe for more updates!

Via: 2Usethebitcoin.com

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