How Does Bitcoin Mining Works?

What is Bitcoin Mining?

Bitcoin can be seen as a virtual commodity and just like other commodities, it needs to be extracted. In the the case of bitcoin, it needs to be mined.

Mining is a process employed by 'miners' to obtain bitcoin. The process is also called 'hashing' and consists of using computers to solve complex mathematical problems. However, that is only the tip of the system.

How Does Bitcoin Mining Work?

The bitcoin network collects all transactions performed during a set period and list them into a 'block'. A long list of blocks is known as a 'blockchain'. Whenever a new block is created, it is added to the blockchain therefore creating a continuously increasing list of transactions that have ever taken place on the bitcoin network.

Each block is put through a mining process by the miners, transforming the information into a sequence of letters and numbers known as a 'hash'. Miners compete with each other to complete the work, receiving a substantial bitcoin reward for every solved block.

The amount of bitcoin awarded depends on a number of factors. There is a base reward for each block to encourage mining activity while some transactions pay a small transaction fee that goes to the miners.

How to Start Bitcoin Mining?

To start mining bitcoin, you need to have a bitcoin wallet where your bitcoins will be stored. There are several wallet options but it is best to select a wallet that allows you to save, buy and use bitcoins as well as one that accepts bitcoins as payment.

Next, you need a mining hardware, such as a home computer with an Internet connection. Once you have purchased the hardware, you will need to install a bitcoin mining software.

It should be noted that there are many ways to mine bitcoin. One is by mining bitcoin by themselves while another is to join a mining pool. A mining pool is a group of individuals who combine their computing power to solve a block and share its rewards.

Yet another, and recently popular method, is through bitcoin farming, or virtual mining. Learn more about virtual mining here