Understanding Bitcoin mining and how it works

One of the most crucial operations involved in the seamless production of Bitcoin and other cryptocurrencies is mining. Essentially, it is a process that helps to create new Bitcoin which will then be released into circulation. So mining is an activity that must be executed. The best part is miners who participate in the Bitcoin mining process get rewarded for it.  Come with us as we walk you through the basic understanding of Bitcoin mining and how it works.

What is Bitcoin mining?

Bitcoin mining is simply the process by which various transactions are verified and recorded on the Bitcoin blockchain. Also, it is the way new Bitcoins are passed into circulation for public use. 

The “Mining” process is generally performed using both hardware and software to develop a cryptographic number that corresponds to criteria. The first miner who manages to find the solution to the problem provided automatically receives the Bitcoin reward and the whole mining process starts again.

The Bitcoin reward that miners earn serves as an incentive to motivate people to help in the preliminary purpose of mining, which is to legitimize and scrutinize Bitcoin transactions, guaranteeing their validity. 

Why does Bitcoin need miners?

Why does Bitcoin need miners
Why does Bitcoin need miners

Miners do the work of confirming the legitimacy of all Bitcoin transactions and get rewarded for their hard work. The mining process is meant to keep all Bitcoin users honest and to avert the issue of “double-spending.”

Why mine Bitcoin?

In addition to giving support to the Bitcoin network, mining also serves another important purpose. It’s the primary way used to send out new cryptocurrency into circulation. So as a miner, you help the Bitcoin network and they reward you for it. 

In the scarcity or absence of miners, the Bitcoin network would still exist, and be sustainable and usable, however, there would be less incentive to partake. 

How does Bitcoin mining work?

Here is a breakdown of the mining process so it will be easy for you to understand Bitcoin mining and how it works:

1. Setting up of very powerful hardware resources

Before you can instigate the process of mining, you need to set up your own powerful computer hardware resources as well as other specific tools to help you solve complex puzzles seamlessly and efficiently. 

As for solid mining hardware, you would need to acquire graphics processing units (GPUs) with well-advanced graphic cards, field programmable gate arrays (FPGAs), or application-specific integrated circuits (ASICs) to make your mining process very efficient and effective.

Currently, ASIC-based hardware is the best and most advanced hardware capable of creating massive amounts of hashes per second during mining. However, this kind of advanced hardware is expensive and may make you break the bank.

2. Installing mining software and e-wallets

what is a wallet address

Other than the very powerful hardware equipment, you also need specific software like XMR miner, CG miner, and multiminer to mine. Many of these mining software are absolutely free to download and can be seamlessly run on Windows or Mac computers. Once you connect the software to the necessary hardware equipment, you are set for your Bitcoin mining.

Another thing you need is an e-wallet to store your rewards as Bitcoins after the mining process ends. A Bitcoin e-wallet is a digital wallet that helps in storing, transferring, and receiving Bitcoin or any other cryptocurrency.

3. Mining pool or solo mining

Miners can choose to mine solo or just go for pool mining. Since it is not easy to mine independently, people invented mining pools to help themselves through the process. 

Basically, in a mining pool, different groups of miners will form together to handle the difficulty of mining. After the work is done, each miner will get paid based on a certain percentage of the reward. Mining Bitcoins in a pool with joint human and computation power helps to promote seamless mining with decreased mining problems to solve a block. 

Also, it promotes the active participation of small miners so that they have an opportunity to earn Bitcoin themselves, even though they will just receive a specific part of the reward. In essence:

More Miners = Reliable + more secured network

You’ll love this: Tips for selling Ethereum online

4. Start the Bitcoin mining process

Once you complete your setup and have decided whether you want to go for pool mining or solo mining, the next requirement is to solve the complicated mathematical hash puzzles to help validate the different transactions on a Bitcoin blockchain. Here’s what you should know about solving a hash puzzle to verify a Bitcoin transaction:

When transactions are instigated in the Bitcoin network the cryptographic hash is automatically developed by the mining software, which combines all the different transactions together, required to generate a block using the encryption SHA-256. This grouping process is called a Merkle tree (or hash tree), in which each leaf node depicts a block’s hash, and non-leaf nodes already have the hash of their child nodes.

Also, all the blocks are bound using a “linked list”, which points to the memory addresses of the last and successive blocks. Each of these blocks contains the pertinent transaction data.

Once the Merkle tree is successfully generated, this transaction data will then be administered and categorized into blocks that already have their own address by the proof-of-work (PoW) algorithm. In order for a block to be validated it must contain PoW, which maintains the integrity of the block and guarantees that the block gets mined at a certain speed. 

Completing the proofing process

Once the proofing of these transactions is completed, the block is automatically recorded on the Bitcoin network and gets prepared to be mined. The miners will then use this information to unravel a hash puzzle in order to verify and record a transaction. 

All the miners actively indulge in the tough race of finding the hash for a stipulated target after examining the difficulty level of the puzzle. This ‘complex specific target’ generally refers to locating a 64-digit hexadecimal number, known as a hash which looks similar to this:


Hence, every block has a distinctive hash linked with it and this hash is always a 64-digit number. The precise target hash is generally determined by the Bitcoin network after every 2,016 blocks. The purpose of this is to conserve the mining complexity so that a block automatically gets mined every 10 minutes that passes on average. 

The Bitcoin mining difficulty is simply a measure of how hard or tricky it is to find a hash determined below the target value. As for the hash rate, it represents the rate at which a miner’s powerful computer can make some guesses per second.

The miner is always concentrating on the string of numbers which is attached to the hashed contents of the last block. If this newly formed hash is less than or even equal to the target hash, then it gets accepted as the answer to the puzzle. The other miners and Bitcoin security nodes will then check if the block is valid or not. If it’s valid, then the block is automatically added to the authorized Bitcoin blockchain network.

And whosoever succeeds in cracking the puzzle first (the first miner), will win the block reward (presently 6.25 BTC per block) and be able to validate the transaction on the blockchain.

How much is Bitcoin mining reward?

Selecting a crypto giveaway prize

The rewards miners receive for Bitcoin mining are decreased by half approximately every four years. When Bitcoin was initially mined in 2009, mining just one block would fetch you 50 BTC. However, in 2012 this reward was halved to 25 BTC. By 2016, the reward was halved again to just 12.5 BTC. The last halving happened on May 11, 2020, when the reward was halved to 6.25 BTC. According to projections, the reward will be halved again to 3.125 BTC in 2024.

What are the downsides of mining?

The risks of mining are generally financial and regulatory. If you are contemplating mining Bitcoin and live in a region where it is prohibited, then you need to reconsider. So it is a good idea to research your country’s regulatory perspective concerning mining and general sentiment toward the cryptocurrency market before you start investing in mining equipment.

Another possible risk of Bitcoin mining is the energy that the computer systems require to run the mining algorithms. Although microchip efficiency has improved for ASIC chips, the development of the network itself is unfortunately outpacing technological progress. Because of this, there are worries about the environmental impact of Bitcoin mining and its carbon footprint. Also, mining equipment generates a lot of heat because of its high power, so your cooling bill will probably increase, particularly if you have one or more hardware running 24 hours every day.

Exciting read: 6 ways to spot fake USDT transactions

FAQs on Bitcoin Mining

Why do Bitcoins need to be mined?

Bitcoins need to be mined because they are fully digital records so there is always a risk of copying, double-spending, or counterfeiting the same digital coin more than once. Mining helps to solve these issues by making it incredibly expensive and resource-intensive to attempt to do one of these things or try “hacking” the network. Clearly, joining the Bitcoin network as a miner is more cost-effective than attempting to sabotage it.

How does mining confirm transactions?

Why is BVN important for signing up on Bitmama

As stated earlier, one of the purposes of mining is to confirm and validate new transactions on the Bitcoin network. This is very important because the blockchain network doesn’t have major authorities such as the government, the bank, or any other third party that can determine which Bitcoin transactions are valid and which ones are not. Rather, the mining process fulfills a decentralized consensus via proof of work (PoW).

Why does mining use so much electricity?

When Bitcoin was first introduced, anybody could easily simply run a Bitcoin mining program from their laptop or PC. However, as the network thrived and expanded, more people became very interested in mining Bitcoin and the algorithm became very difficult. 

This happened because the code for Bitcoin aims to find a new block once every 10 minutes, on average. If more Bitcoin miners get involved, the chances that someone will solve the hash faster increases, so the difficulty level automatically increases to meet that 10-minute goal. Now, imagine if thousands of mining power join the blockchain network. That’s a whole lot of new powerful computers consuming energy.

Is Bitcoin mining legal?

The legitimacy of Bitcoin mining primarily depends on your geographic location. While it is legal in some countries, it is prohibited in others. Since the concept of Bitcoin may threaten the authority of regular fiat currencies and the government’s power over the financial markets, a ban has been placed on Bitcoin in some countries. 

Countries like Tunisia, Nepal, Algeria, Morocco, China, and Bangladesh have banned Bitcoin mining and ownership. We advise that you check if mining is legal in your location before you start. 

Does crypto mining damage your GPU/computer?

how to build a smart contract

Since blockchain mining is extremely resource-intensive, it may put considerable strain on your GPU or any other mining hardware that you use. In fact, GPUs may even wear out or burst into flames during the process. However, if you keep your mining rigs clean and very cool with a surge protector, then they’re typically safe.

New to the crypto game? You should read this: Top 10 Bitcoin terms you should know

What purpose does Bitcoin mining serve?

Bitcoin mining primarily serves two purposes to the network: It helps to confirm transactions on the Bitcoin network secures it and also passes new coins into circulation.

What are the main costs associated with Bitcoin mining?

The three greatest costs for the Bitcoin mining process are network infrastructure, electricity, and mining infrastructure.

Should you mine Bitcoin?

Bitcoin mining is a very expensive hobby with no guaranteed outcomes. To be competitive, then you will have to invest in numerous expensive and high-power machines, run them all day long, and pay outrageous electricity bills. Even with this, there is still no guarantee that you will gain any Bitcoin.

Is Bitcoin mining green?

What are green cryptocurrencies

Bitcoin mining’s power usage has been heavily criticized by climate activists because it is proof that the cryptocurrency is not eco-friendly. The Bitcoin mining process is gauged to deplete as much electricity as full countries. Nonetheless, as the world shifts toward renewable energy sources, the mining process of Bitcoin is expected to become greener.

Can you mine Bitcoin on your iPhone?

No, you can’t. This is because Bitcoin mining currently requires huge amounts of computing power and electricity as it is very competitive. Running your Bitcoin mine on a mobile device, even if you function in a mining pool, will probably result in no earnings.

While Bitcoin mining seems very easy and appealing, the truth is that it’s very difficult and expensive to actually execute profitably. The volatility of Bitcoin’s value even adds more tension and uncertainty to this work. Also, note that Bitcoin mining, and crypto mining in general, is a huge financial risk because nobody is willing to go through all the hassle of buying extremely expensive mining equipment just to have no profit on their investment. So you must approach mining with caution. Now that you have a basic understanding of Bitcoin Mining and how it works, it is left to you to decide if you want to engage in it or not.

Bitmama offers a secure marketplace for crypto enthusiasts. Perform activities like crypto trading, crypto staking, and creating virtual dollar cards for online payment. Get started today by downloading the Bitmama app.



Oct 31, 2023

11 mins read

Join Newsletter

Sign up to our newsletter today to be on top of every development in the cryptoverse.

right arrow

Share Article

bitmama social

Copy Link

  • Company
  • About
  • Career
  • Privacy Policy
  • Terms of Service

Did you know you can do more with crypto while on the go?

Get Bitmama mobile app and find out


Fastest, Easiest and Cheapest way to buy cryptocurrencies.

Bitmama Google Play Store
Bitmama App Store
Bitmama facebook handle
Bitmama instagram handle
Bitmama twitter handle
Bitmama linkedin handle

Bitmama offers its products and services in partnership with licensed transmitters in their respective jurisdictions.

All trademarks and brand names belong to their respective owners. Use of these trademarks and brand names do not represent endorsement by or association with Bitmama.

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an Account. What this means for you: When you open an Account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see a copy of your driver’s license and/or International Passport.