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How Bitcoin Mining Works

Published on 17 May 17
How Bitcoin Mining Works - Image 1

When it comes to conventional currencies, the governments of that country print more money whenever they need to. But in the case of bitcoins, they are neither printed, nor made, but they are actually mined, using computers. With users competing with each other to mine coins.

How does mining take place?

People send each other bitcoins all the time over the bitcoin network, but unless these transactions are accounted for and duly noted, no one would be able to track who paid what, and to whom they paid. This is overcome by recording all the transactions made during a particular period of time, in a list called a block. The miners are then required to confirm those transactions, and then, the confirmed transactions are in turn recorded in the general ledger.

The general ledger is a list of blocks, known as the ‘blockchain’. Whenever a new block is created, it is added to the blockchain, creating a lengthy list of all the transactions that have ever been made in the history of bitcoins. And this list is constantly updated in the system. Websites like have also come up that help make life easier for bitcoin traders.

Now the miners come in, when a block is created; miners would apply a formula to it, and turn it into a shorter, random sequence of alpha numeric characters known as hash. This hash is stored in the blockchain along with the block. Since this is a very easy process, the bitcoin network, introduces a set of guideline as to how the hashes should look knows as the bitcoin protocol. This is achieved by combining the hash that the user created with a random piece of data called a ‘nonce’. If the new hash does not fit the required format of the protocol, the entire thing is re-hashed again, and the process is restarted. The strain of having to do this over and over again, to meet the required standards, while millions of users also try and do the same thing on the same network at the same time, makes life difficult for a miner, and hence why they of such high value.

This blog is listed under Open Source , Development & Implementations and Data & Information Management Community

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