What Is Bitcoin Mining And How It Is Done?

In 2017, the whole world went crazy on Bitcoin which led eventually for Bitcoin to hit around 19700$ by December of the same year. Investors couldn't believe how did they miss this chance of investing in Bitcoin which was trading as low as few cents in 2009 when it was first released. If you were interested in Bitcoin at any time of your life your would have probably read about Bitcoin mining which is the process of extracting or getting new Bitcoins that weren't there before instead of buying it.

What Is Bitcoin Mining And How It Is Done?

All bitcoins on earth now were mined by some person or a group of people one day so if you are going to buy any Bitcoins from someone this means this person did either mine it himself or bought it from someone else who did the job. 

The first person to have ever mined Bitcoin was using a pseudonym (Satoshi Nakamoto), the inventor of Bitcoin himself. Mr. Nakamoto is a mysterious person with very rare information about his identity but he started the blockchain in 2009 and hence started the whole mining process. Read this article about the most mysterious man on earth (Satoshi Nakamoto).

The term (Mining) regarding an electronic cash system based on virtual coins seems pretty weird is we usually use that term for digging the ground to extract precious or valuable materials (mostly gold or oil) but the process of mining itself is pretty similar to the real life mining due to many factors:

Firstly: Bitcoin miners use specialized equipment (could be some casual computer, cell phone, or even more specialized devices for this kind of process) to generate random codes that would match a certain hash and if they succeed in doing so they will be awarded bitcoins in return.

Secondly: The Bitcoin amount is limited and is claimed to be a final count of only 21 million Bitcoins in the end (according to the Bitcoin organization itself) that will be ever extracted. Most of Bitcoins are already extracted (around 17 million of the total 21 million to be extracted) while the mining process itself seems pretty hard nowadays and getting harder everyday than the previous one due to the ascending difficulty if generating bitcoin hashed codes (a process performed by the Bitcoin organization).

What Is Bitcoin Mining And How It Is Done?Some usual Bitcoin mining equipment

So, now we try to dig for a relatively rare currency where digging gets harder everyday due to elimination of the existing supply with only 4 million Bitcoins to be dug unless the Bitcoin organization itself changes their protocol of Bitcoin supplies which is unlikely to occur in near future as it will affect the credibility and the market value of Bitcoin.

How the mining process is done:

Mining process requires a specialized equipment as we said previously that will consume great amount of energy and will produce much heat so using your laptop or cell phone to try this process will stand out no chances in getting anyway near generating a Bitcoin code that would match the required hash.

Usually there are groups of people or even organizations who would call themselves (a mining pool). This mining pool is a group process of many investors who invest in providing such equipment and paying the bills for the sake of digging for Bitcoin codes.

Bitcoin hashes:

The word (Hash) means in coding terminology the process of putting some meaningful word into a ciphered meaningless form using some encoding methods. Lets says we use the word (tree), now when we hash it it would show something like (236her5j32dshaae43dhfsa). This method is well knows to programmers and in case of Bitcoin they use the hashing method (double sha256).

Now you will have to download the Bitcoin software to start the process. Bitcoin will provide some hashed code every 10 minutes roughly and allow worldwide users to decipher it. A successful winner with deciphering process will be awarded 12.5 BTC which is the current reward. The reward used to be 50 BTC at the beginning then it was halved to 25 and now it runs at 12.5 reward for the winning user. The winning hash will be added to the Bitcoin blockchain and a new competition will start and all users will have to rebuild up again upon your code and start from the beginning.


A block chain is a chain of blocks containing the discovered or mined bitcoins in a specific order beginning with the first Bitcoin that was ever mined (block 0) and ending with the last one discovered. 

An example of a blockchain would look like this:


This previous example starts with the hash of the previous block an 3 transactions that went on. Now we need to complete this block with a deciphering process as Bitcoin uses (double sha256) encryption technique but lets try to simplify it. The previous example started with 13 zeroes which is pretty hard difficulty level and goes harder with time as new released hashes get more starting zeroes with time.

Now you will try to match a random code of your choice with the hashed code provided, lets assume that I tried to match number 17 with the code and it shows no luck, now I will try the number 18-19-20 and so on till I reach 210 and then I can reveal the first zero. I will try again for the second zero to be revealed and so on for revealing the whole 13 zeroes. 

Like we said, you should be pretty fast as the competition starts over and over every 10 minutes with competitors from all around the world and your usual hardware would stay far away from competition. The process is hard, costly, but eventually rewarding. Bitcoin market value runs around (6000 $) now, it could go higher anytime like it did before hitting (19700 $) in 2017 like we said so the reward of 12.5 BTC should be equal to (75000 USD).

Many people from all around the world try out their luck by investing in Bitcoin mining equipment while others prefer to join an already going Bitcoin pool to share with other people. Even some software would use normal users devices to share in the process of Bitcoin mining without them knowing like some torrent software and some computer games.

To give you a hint of how hard Bitcoin farming would be, some investors in USA are planning for a 700 million dollar Bitcoin mining farm that will be operational in 6 months from now, for more info read this article here by CNN.

What Is Bitcoin Mining And How It Is Done?

  • Share

    • 2159
    • 3,108