What is bitcoin mining? How does this work?

Bitcoin mining is the way toward confirming bitcoin transactions and recording them in the public blockchain ledger. The individuals who have the necessary hardware and computational power are called miners.

What is bitcoin mining? How does this work?

Before we begin to know about bitcoin mining, let's have an understanding of Bitcoin and its related technologies.

What is bitcoin?

Bitcoin is a computerized currency that works free from the oversight of banks or governments or any related central control. Rather it depends on peer-to-peer programming and cryptography. It has no immediate connection to any real-world money, nor is it controlled by any administration. However, individuals can (and do) use it to buy genuine things at significant retailers. 

Each transaction is openly communicated to the organization and shared from one node to another. Every few minutes, these transactions are collected together by miners into specific groups called a block which is then and added to the blockchain.

You have now heard about blockchain in the previous paragraph and might be wondering about it. Don't worry! Let me tell you what blockchain is.

What is blockchain?

Blockchain is an arrangement of recording data that makes it difficult to change or cheat the system. A blockchain is a computerized ledger of exchanges that are copied and circulated across the whole network of computer systems on the blockchain. various transactions are contained on Each block in the chain. and each time one transaction happens on the blockchain, a record of that transaction is added to each member's ledger. The decentralized database managed by different members is known as Distributed Ledger Technology (DLT).

Blockchain is a kind of DLT wherein transactions are recorded with a permanent cryptographic mark called a hash.

Chain Formation

The few steps to form the chain (of blockchain) are:

  • Transaction

 Two parties consent to make a transaction. It very well may be of any asset that can be described in a digital format, for example, cash, contracts, or deeds.

  • Smart contract

 A piece of software that sits inside a blockchain and acts as the digital contract for the transaction is said to be a Smart contract. At this stage, information is entered identifying with the contract, for example, the price, information about the item, order quantity, and delivery date. At the point when the concurred terms are met, the smart contract consequently triggers the activity that requires a check.

  • Verification

 The transaction's record turns into another block containing: the transaction's information, a one-of-a-kind hash, and reference to the past block's hash. It is the sequence of connected hashes that makes a protected chain between blocks.

  • Validation

 For a new block to become part of the chain, it should be approved by the group via means of a “consensus mechanism”.

  •  Distribution network. 

When a block has been approved it is added to the blockchain and dispersed to every one of the individuals from the network. The transaction is recorded in near real-time. No third party is required and is held in a distributed ledger that can't be modified or changed.

Now, let's come to our main question.

What Is Bitcoin Mining?

Bitcoin mining is the way toward confirming bitcoin transactions and recording them in the public blockchain ledger. In the blockchain, the transactions are checked by bitcoin users, so essentially the transactions must be confirmed by the members of the network. The individuals who have the necessary hardware and computational power are called miners.

Why do people mine bitcoin?

Bitcoin offers an innovation in the blockchain. The currency is decentralized, permitting transactions to happen worldwide without government limitations. With the most recent mining innovation, Bitcoin mining can be said to be a mode of income dependent on the yield of mining rigs. The significant elements to Bitcoin mining productivity are :

Hardware for computation

Miners should have the latest hardware to meet up the demanding requirements for successful mining. Equipment can get old very quickly. mining-specific hardware is required by the miners, which might be costly. The latest ASIC mining rigs are priced over $1,500 per computer.


Power costs

The main operating expense is considered to be power. Productivity for mining can cost from $0.03 – $0.08 per kWh as per sources. A change in a couple of cents can have a significant effect on mining benefits. The miner can utilize power at the most minimal expense.


Bitcoin price

The cost of Bitcoin is important in mining because miners receive a certain amount of Bitcoin when they are able to solve math problems correctly. If the current Bitcoin block reward is 6.25 coins; you will need those coins to be worth as more as possible. If you receive 6.25 coins and the cost of Bitcoin is $5,000, your mining activity will not be beneficial. If the price of a bitcoin is $12,000 per coin, your mining activity may work at a solid benefit.

The right combination of the components above makes mining an appealing endeavor. On the off chance that the factors are altogether good, miners can increase activities and mine productively and profitably. 


The other alluring reason to mine Bitcoin is that it has a huge potential in the form of investment. 

So, there are basically three main points to bitcoin mining:

  • Bitcoin mining includes incredible computers attempting to take care of the complex numerical problems of the Bitcoin algorithm. 
  • Solving these issues helps keep the blockchain ledger and organization secure reliable. 
  • All Bitcoin miners add to this process. The miner who effectively takes care of a numerical problem is awarded Bitcoin.

Recently Elon Musk, CEO of Tesla announced that they will not accept bitcoin as payment as bitcoin mining leads to a lot of energy consumption. This is a matter of concern for the environment. 

A few questions have arisen after this announcement. 

  • Does Bitcoin mining harm the environment?

As miners utilize huge and productive systems to mine blocks and approve transactions, this uses an enormous amount of power. Additionally, miners get newly created Bitcoins as the processing fees of transactions in exchange for their services.

  • How are Bitcoin mining and fossil fuels related?

The crypto world is generally reliant upon fossil fuels. the mining of cryptocurrency regularly utilizes power delivered from non-renewable energy sources. As the cost of Bitcoin increases, so does the amount of energy burned through as miners mine coins with the value rise, This attracts more users to join the Bitcoin network.

  • Is Bitcoin Legal?

Bitcoin is legal in most countries in the world but there are a small number of nations that have banned its use. Countries, where Bitcoin is banned, are China, Russia, Vietnam, Bolivia, Columbia, and Ecuador. We can get the information through google about the usage of bitcoin in different countries and also their regulatory policies. As the regulations might be different in different countries, we should always have good knowledge about our location’s law before joining the bitcoin network.