What Is Mining?

Everything you need to know about mining and how it works, difficulties which miner can face during the process, special hardware invented for mining as well as the explanation of the mining pool concept

There are two ways of getting Bitcoins, either to buy them or to earn them by mining. Not sure what is Bitcoin mining and how does it work? Follow this article to get the idea behind this technology in the simplest way possible.

Mining is the process of adding new transactions to the blockchain. Mining is done by computers with special software installed on them. Any node in an open blockchain network can be a miner. Transactions fees and block rewards serve as incentives for nodes to join miners and add to the total hashrate of the network, which makes the blockchain more secure.

Mining a block

Mining requires a lot of computational resources so that no one node can change the data on the blockchain. A miner creates a block by adding a bunch of unconfirmed valid transactions together and sealing it by cryptographical means. Sealing the block is a very important part of mining, as it prevents the block from being changed or deleted and serves as a proof-of-work for other miners. The first miner to complete their block gets all the transaction fees and a block reward, a fixed number of bitcoins, for example. These block rewards are the only way new coins are added to the total supply.


The difficulty of mining is set at a certain level so that new blocks are created at approximately same intervals. In Bitcoin, a new block is added to the blockchain every 10 minutes; the difficulty is adjusted every 2016 blocks. If the previous 2016 blocks were mined faster than the intended speed, the difficulty increases, and vice versa.


Satoshi intended Bitcoin to be maintained by every node. He wanted everyone to participate in the network, use bitcoins as e-cash, and create new ones along the way. Soon, however, Bitcoin reached a wider audience, and mining became is a fully viable way of earning money, a business model. The bitcoin community divided into two: those who use bitcoins as money and those who earn money by mining bitcoins. Mining became competitive, and people started upgrading their computers to raise the chances of finding blocks. Later, tech companies developed ASICs, hardware specifically designed to mine bitcoins. And as ASICs were getting popular, it became harder for people with regular computers to compete.

Mining pools

People realized that individual mining is not very profitable. They joined together in mining pools. A mining pool is a group of miners that share block rewards between each other so that each miner has a steady income. Mining pools present a threat to the security of a blockchain network, as they possess large portions of the total network hashrate. If a mining pool controls more than half of the total hashrate, they can perform what is called a 51% attack and compromise the blockchain.


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