Intro to Mining Bitcoin: What You Need to Know

When it comes to obtaining digital currency such as Bitcoin, you can acquire these tokens in three different ways: purchasing the currency directly from an exchange, receiving them in exchange for services or goods, or of course mining for new ones.


The term mining refers to a digital process which involves increasing transaction details to a Bitcoin’s public ledger named Blockchain. This process provides the utmost security as each transaction is confirmed one block at a time. In addition, each user in the blockchain network has access to the coin’s ledger. This process helps pinpoint legitimate cryptocurrency transactions from illegal attempts to reuse the same coin that was previously spent elsewhere.

  • Mining Defined: The digital act of recording data, achieved through the power of computer-based processing
  • Blockchain Defined: The chain of records obtained from each Bitcoin transaction distributed along a public ledger

Hash and Info

The term Blockchain directly refers to its structure, a chain or row of blocks listing data recorded from transactions that occurred throughout a set time frame. When attempting to mine for Bitcoin, developers or miners in this case, find blocks through a mathematical process that utilizes complex formulas extracting information and essentially reducing the size of the chain. It can be described as a very short sequence of digits and letters termed the Hash.



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Example of SHA-256 Hash, which is used in Bitcoins blockchain

Not only does any given hash consist of data derived from the block of digital transactions itself, it also records information from the hash assigned to the previous block along the blockchain network.

Although the process of creating a hash is relatively simple, it is impossible to determine what data source the hash was derived from by simply reading the sequence.

In addition, every hash is entirely unique, altering even one digit from the Bitcoin block will affect the final hash sequence produced. Despite the amount of inputted data, a hash will always result in a fixed length. These key characteristics allow a hash to behave like a digital version of a wax seal. Any attempt to tamper with blockchain transactions will immediately alter the hash sequence in addition to all hash sequences that follow. This form of security allows acts of fraud to be easily detected by anyone using the network.

  • Hash Defined: A unique fixed-length set of randomized digits that can be extracted from any size of data.

Miner’s Rewards

Coincidentally, miners perform an important service for the Bitcoin ecosystem as they confirm transactions and ensure each is legitimate. The competitive nature of mining allows this rigorous process to be completed through the use of specific software, offering a reward to miners with every successful hash created. This process is known as sealing off a new block.

According to the previous value calculation in October 2017, reward for finding each block was valued at 12.5 Bitcoins which will be cut down by half at every stage of 210K blocks. The next halving will occur in May 2020.

Since the total quantity of coins is limited, every additional coin mined adds value to the total amount of existing coins. In this sense, miner’s rewards will remain the same or possibly rise in value despite the quantity of bitcoin decreasing per block throughout time.


Although creating hash sequences from data in itself is a simple process, the network deliberately attempts to make this challenging in order to deter miners from producing all available coins at once.

Bitcoin Mining Challenges

This process is achieved through the consensus mechanism called Proof of Work. For this system to work, some work is necessary to generate a valid POW, usually resulting in an increased length of computer processing time. The production of blocks in a POW consists of a randomized process using the trial and error method to combat its low probability. The end result of a hash sequence in this sense acts as proof of work in the Bitcoin environment.

Proof of Work Defined: a measure taken in order to deter attempts of fraudulent activity by ensuring a certain amount of work is fulfilled from the requester, often resulting in additional time devoted to computer processing.

Harder Over Time

Making the mining process even more complicated, the Bitcoin difficulty is another aspect that adds to the effort needed to produce coins. The term refers to the level of difficulty attached to finding any given block, compared with the least possible unit of difficulty required.

Although mining a single block can potentially take as little as ten minutes, the system is designed to combat the growing number of miners joining the network who essentially raise the rate of which blocks are generated. By increasing difficulty levels, this growth rate can be controlled and brought down. For blocks released that fail to match difficulty levels will be deemed fraudulent and thus rejected by network users.

The mining process requires a significant amount of work, with every effort slowly increasing the availability of digital currency. This phenomenon resembles that of traditional mining for valuable resources such as gold.

  • Bitcoin Difficulty Defined: A measurement of how complicated it is for computers to create a valid hash. This type of measurement is calculated in stages and occurs after 2016 new blocks.

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