Cryptocurrency What is Meant By Bitcoin Mining?

Bitcoin mining leads to the creation of new BTC coins. Miners use powerful computers to find a specific cryptographic solution, and the first to succeed is rewarded with newly created Bitcoins and transaction fees. 

While the concept of Bitcoin mining may be vast, this write-up aims to provide an understandable breakdown of what it entails and some expert explanations of it.

So, keep reading!

What Does Bitcoin Mining Mean?

Bitcoin mining is similar to solving complex puzzles to verify and add transactions to the blockchain, the digital ledger of Bitcoin.  Miners contribute their computing power to validate and record transactions on the public ledger and blockchain, confirming their legitimacy.

This effort is resource-intensive and intentionally challenging to maintain a steady rate of block discovery, preventing rapid inflation. Mining involves solving mathematical puzzles, and each block on the blockchain must have a valid proof of work. This proof is verified by other Bitcoin nodes in the network, ensuring security and tamper resistance.

Miners are rewarded with Bitcoins, with the reward initially set at 25 coins per block and halving roughly every 210,000 blocks. Individual miners can also join network farms, where computational resources are shared, and rewards are distributed based on their contribution. 

As more Bitcoins are mined, the rewards decrease, ultimately capping at 21 million Bitcoin. Beyond this point, miners will rely solely on transaction fees.

The term “mining” is used because, like mining for physical resources, it requires substantial effort and gradually introduces new currency into circulation, akin to mining precious metals like gold and silver from the earth.

Bitcoin Mining Processes – How It Works?

Bitcoin mining is like a game where miners compete to guess a number, but it’s a complex cryptographic puzzle, not a simple guess. Miners use powerful computers to make guesses, trying to find a number (hash) that’s equal to or less than the target set by the Bitcoin network.

This target hash represents the difficulty level of the puzzle. Imagine the target hash is similar to your chosen number, 19. Miners make countless guesses by changing a small piece of data called a nonce in the block they’re trying to add to the blockchain.

The first miner to find a nonce that results in a hash equal to or lower than the target wins the right to add a new block of transactions to the blockchain.

Others’ guesses that exceed the target, like 21, 55, or 83, are rejected. It’s a race against time and computational power. The miner who discovers the correct nonce gets rewarded with newly created Bitcoins and transaction fees.

Over time, as more miners join the network, the puzzle becomes harder (the target hash becomes lower), maintaining a steady block creation rate. This competitive and resource-intensive process ensures the security and integrity of the Bitcoin network, making it resistant to manipulation.

What is a Hash?

A hash is a scientific function where an input of any length is transformed into a fixed-length encrypted output. As such, it’s represented as a string of numbers or characters.

Hashes are more frequently used in cryptography and computer science to confirm data integrity, verify information, and protect digital communication.

Notably attributes of a Hash:

  • Input: Hash functions take an input message, which can be of variable length.
  • Processing: The input is processed using a specific algorithm that converts it into a fixed-length output, commonly referred to as the hash digest or value.
  • Fixed-Length Output: Regardless of the input’s size, the hash output always has the same length.
  • Deterministic: The same input will always appear in the hash output. It is a one-way function, meaning no one can reverse-engineer the input from the hash.
  • Collision-Free: Ideally, different inputs don’t produce the same hash; otherwise, a collision will occur.

One common cryptographic hash function is SHA-256 (Secure Hashing Algorithm 256). It converts input to binary and creates hash digests or values. Next, it initializes constants and divides data into chunks. Afterward, it creates a message calendar, runs a compression loop, and modifies the final digests or values.

Examples using SHA-256:

  • Input “Hello” produces hash: 185f8db32271fe25f561a6fc938b2e264306ec304eda518007d1764826381969
  • Input “Hello world” produces hash: 64ec88ca00b268e5ba1a35678a1b5316d212f4f366b2477232534a8aeca37f3c
  • Input “Hello John” produces hash: a8119595d77342cc73c93697a7f70920d3f4ded5d458e31907607e997ff76868

Changing a single bit in the input drastically alters the hash output.

Examples of Hash Use:

  • Blockchain: In blockchain technology, each block contains the hash of the previous block, ensuring the immutability of the chain. Bitcoin uses SHA-256 for this purpose.
  • Digital Signatures: Cryptographic hash functions are part of digital signatures. The hash of a document is signed by the sender to prove the document’s authenticity and integrity.
  • Password Storage: Hashes are used to store passwords securely. Instead of storing plaintext passwords, systems store their hashes, making it difficult for attackers to retrieve the original passwords. 
  • Data Integrity: Hashes are used to verify that data has not been altered during transmission. Any changes can be detected by comparing the hash of the received data with the original hash.
  • Data Deduplication: Hashes are used to identify duplicate data. If two pieces of data have the same hash, they are considered duplicates.

Hashes are critical tools in computer science and cryptography, providing a secure and efficient way to verify data, protect passwords, and ensure the integrity of digital information in various applications.

In the context of Bitcoin mining, cryptographic hashes play a crucial role. This process ensures the security and integrity of the Bitcoin blockchain. 

It makes it extremely challenging to alter transaction data or create fraudulent blocks, ultimately underpinning the trustworthiness of the entire Bitcoin network.


Bitcoin mining is the foundational process that not only introduces new Bitcoins into the system but also upholds the security and integrity of the entire cryptocurrency network. Through their computational efforts and competition, Miners find the right hash values, validate transactions, and create trust in the blockchain. 

This resource-intensive and tamper-resistant approach mirrors the laborious process of mining physical resources like gold and silver. 

As cryptocurrency evolves, Bitcoin mining remains a critical component, ensuring the continued reliability and decentralized nature of the world’s most well-known digital currency.

Asad Gilani Crypto Editor

Asad Gilani Crypto Editor