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Bitcoin Mining

Have you ever wondered how is bitcoin generated? The crypto currency doesn’t come under the control of any central government unlike paper money. What’s involved is bitcoin mining, a process that involves special software to solve mathematical problems.

What is bitcoin mining?

Bitcoin is a peer to peer network where users make up a small fraction of what can be considered the entire pool of bitcoin, similar to a bank. However, the big question is where do Bitcoins come from? When it comes to fiat currencies or paper money, any decision to print and distribute money is made by a government. However, Bitcoin and other cryptocurrencies are decentralized and are not controlled by a central government.

For Bitcoins to be produced, miners use special computer programs to solve math problems and are issued a specific amount of Bitcoins in exchange for their work. Not only is this an intelligent way for the currency to be pumped into circulation, but it also ensures growth as more and more people find more and more and more incentive to become miners and start mining Bitcoins themselves. The network remains significantly secure since Bitcoin transactions need the miners’ approval.

The complexity of the math problems are changed by the Bitcoin network automatically. It depends on the rate at which these problems are being solved. The faster the problems are getting solved, the harder the problems will start to get. In the early days, miners used their processors and computers to solve these problems, some miners then realized that graphics cards which were designed to facilitate gaming were actually faster in solving these problems. However, these graphic cards are powerful and consume a lot of electricity and generate a lot of heat.

Earlier, Bitcoin mining products were essentially such graphic cards or chips that were re-engineered specifically for mining Bitcoins and were faster. However, these chips consumed a lot of power and electricity. ASIC (Application Specific Integrated Circuit) chips have revolutionized Bitcoin mining since they are able to solve complicated math problems at high speeds and yet not consume as much power or electricity.

As more and more Bitcoin miners join the network, the problems get harder and harder and it has become difficult for individuals to be able to solve these math problems. In order to beat this challenge, Bitcoin miners now work in pools, when miners work in pools they are able to accomplish and solve more problems together and they are each awarded reward proportional to the work and efforts that he or she has individually put in.

Mining keeps the network growing, stable, safe and secure! The network is kept secure, since miners approve transactions so that no unauthorized transaction falls through the cracks.

The Bitcoin network uses a blockchain which is what promotes transparency and fairness. The blockchain can be thought of as a public audit trail or audit log wherein everyone can see all transactions that are happening, this real time ledger of past transactions is what is called a blockchain, since it is essentially a chain of blocks. Miners come into the picture as they are the ones who add transaction records to the blockchain by approving the transactions. The blockchain facilitates confirmation to the entire Bitcoin network that the transaction is complete.

Therefore, Bitcoin mining, in its essence, can be broadly classified into two working parts;

  1. Miners confirm transactions by focusing computational power on a block


  1. Miners that do this work are themselves issued new Bitcoins and this is how new Bitcoins are issued in each block

What is Proof of Work?

Proof of work is a way in which we can ensure that miners actual had to undergo some work and put in some commendable efforts before they are rewarded with Bitcoins. This genius in proof of work lies in the fact that while miners will face difficulty and have to put in effort to make new information on the blockchain, it is very easy to verify the same.

So what sort of effort are we taking about? Well, miners will have to invest time, hardware and processing power, in order to create new info or blocks. When this is verified, and the problems have been confirmed as solved, the miners are given their rewards.

What is Bitcoin cloud mining?

Instead of buying actual tangible hardware in order to serve as the computational power to solve their math problems, cloud mining allows for miners to instead pay for already acquired hardware which are in data centers across the globe and then use it to mine Bitcoins.

The advantages of course are – the miners can now earn Bitcoins without having to worry about maintenance of the hardware, software, how much electricity they are consuming, etc. All they need to do is pay a fixed fee and use the hardware for their benefits.

In summary, this is just the tip of the ice berg when it comes to Bitcoin mining. We have only scratched the surface and there are a lot more details that we can dive into. However, this should be a good starting point for you to get a general idea as to what Bitcoin mining is and what it mainly constitutes.


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