How Is Bitcoin Mined? Key Bitcoin Mining Facts To Know

When people think about mining they think about things that are dug out but when we refer to Bitcoin we basically talk about money. It should be no surprise that Bitcoin mining is not understood.

Why Do We Call It Bitcoin Mining?

The reason why it is called mining is that the process is very similar to how people mine gold. Bitcoins already exist in the design of the protocol, similarly to how you find gold underground. This protocol basically stimulates that there are 21 million Bitcoins that exist. The miner needs to find the coins.

Basically, Bitcoin mining is the process through which Bitcoins are discovered.

Not much should be known about Bitcoin mining for most people. The most important things you should be aware of are the following.


The node is a very strong computer that is running Bitcoin software. Nodes help keep Bitcoin running as they are parts of information relay. Every single person in the world can run nodes. The Bitcoin Software is free and can be downloaded. A port is left open and the computer becomes the node. The problem is that this will consume a lot of storage space (over 150 GB and growing) and energy.

Nodes are actively spreading transactions across the worldwide network. A node sends info to other known nodes. Those nodes send information to other known nodes and so on. Information thus manages to go around the world really fast.

Mining Nodes

Some of the nodes are “Miners”. They group the outstanding transactions and then add them to blockchain. This is done through solving a really complex mathematical puzzle (included in the Bitcoin Program). When the answer to the puzzle is found, it is added to the block.

Puzzles are basically tasks. The task is to find the number that can be combined with block data and then passed through hash function. For some people this sounds simple but for most it will be really hard. In reality, the entire process is much harder than it seems.

Locating that number is actually done through random guessing. Hash function makes it impossible to accurately predict the outcome. Miners guess mystery numbers and then apply hash function to those numbers to check and see if they are correct. The very first miner that will solve the puzzle announces it and other miners stop working on that puzzle. Victorious miners receive a Bitcoin as reward.

The Economics Of Bitcoin

The reward miners get for solving a puzzle keeps going down. Right now it is around 12.5 BTC. This is quite a lot of money. However, the deal is not as great as it sounds. The number of mining nodes competing for a reward is huge. At the end of the day, the two factors that decide who finds the result are computing power and luck. Computing power practically means how many guessing calculations can be performed at the same time.

Mining node running costs are high. The hardware necessary is powerful and expensive. At the same time, a lot of electricity is needed when running processors. In addition, every 4 years the reward you receive halves. Bitcoin value related to electricity and hardware costs goes up. Bitcoin grows in value to compensate for the growing hardware and electricity costs.

Calculation Difficulty

Calculation difficulty is constantly adjusted. The reason is to make it take around 10 minutes for one block to be processed. The 10 minutes timeframe was coded in order to keep the system generating Bitcoins constantly and slowly until the maximum of 21 million is reached, which should happen around 2140.

Summary In Simple Terms

Much more can be said about Bitcoin mining. The system is really complex but to keep it as simple as possible, we have computers that are solving mathematical puzzles. When the result is found, Bitcoins appear. In order to “mine” Bitcoins you need computers that consume a lot of electricity and that are really strong in terms of included hardware.

Fortunately, most people will never have to worry about the mining aspect of Bitcoin. Still, it is good to know at least the basics above.


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