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What is Bitcoin mining?

Understanding Bitcoin mining can be as complex as mining itself. There are many technical concepts involved. Let’s break them down into the most simple fundamentals.

How does Bitcoin mining work?

As we know, Bitcoin runs on blockchain technology, which consists of individual blocks of data linked to each other and registered on an online public ledger (hence the term “blockchain”). However, the network needs to verify that the information and transactions are trustworthy and reliable before registering onto the blockchain. This is where Bitcoin mining comes into place.

Cryptocurrency mining is a process that guarantees the safe continuity of the Bitcoin network while avoiding fraudulent and malicious intents like double-spending. Therefore, the primary purpose of mining is validating transactions on the blockchain to ensure information security and transparency. To do this, miners need to compete against each other to solve complex mathematical problems, requiring significant computing power. That is the standard validation method for proof-of-work consensus algorithms.

You’re probably wondering what these complex mathematical problems are. They consist of finding a 64-digit hexadecimal number called hash, which is the fingerprint of each block. The first Bitcoin miner to find the hash will add the block (and all its transactions and data) to the ledger, forever recording it on the blockchain while earning a reward for doing it. Every single data block on the chain contains its own and its predecessor’s hash so that anyone can track every link back to the very first one.

Bitcoin mining rewards

As you can imagine, mining Bitcoin is a difficult task. It requires expensive hardware, dedicated software, and a lot of electricity. On top of that, the competitiveness between miners is fierce. They have to try out all the possibilities they can until they find the hash. The amount of calculations a miner can try out in a specific amount of time is called hashrate and is directly proportional to their computing power. The more hashrate they can achieve, the bigger the chances they will find it first.

Why is there so much competition? The network provides an economic incentive for mining and keeping the blockchain running. This is composed of the fees corresponding to the transactions of a particular block plus the block reward, which is a specific amount of newly minted Bitcoin.

That said, mining not only validates transactions and saves them onto the blockchain, but it is also the method through which new Bitcoin enters circulation for the first time. The exact amount of new coins miners receive as a reward for mining halves every four years or exactly 210,000 blocks.

Of course, rewards would stop when Bitcoin reaches its maximum supply of 21,000,000 in circulation, although according to the halving schedule, that won’t happen until the year 2140.

Bitcoin issuance over time. Halvings are clearly visible in the vertical declines (Source: Coin Metrics).

What do you need to start mining Bitcoin?

The more competitive mining is, the more computing power you’ll need to “win” a block and, thus, the more advanced hardware you’ll have to get to acquire it. The blockchain runs an algorithm that adjusts mining difficulty every two weeks according to the overall number of active miners. With today’s global hashrate, the days when mining with a regular computer was possible are long gone.

Now, if you want to mine cryptocurrency, you’ll have to set up dedicated mining rigs. These are computer systems consisting of:

  • A central processing unit (CPU).
  • A motherboard.
  • A solid-state drive (SSD).
  • A random-access memory (RAM).
  • Several graphic processing units (GPU) or graphic cards.
  • Most times, some kind of cooling system (fans, for example).
  • A power supply.
  • A frame to hold everything together and in place.
A fully equipped mining rig.

Additionally, with the professionalization of mining, specialized equipment known as ASIC miners have come out, specially designed to mine Bitcoin efficiently and consuming less energy. These are more expensive, but extremely more powerful than GPU mining rigs.

You would also require specific mining software to link up with the Bitcoin network.

To mine or not to mine

You might be wondering if, with all the equipment required and the overwhelming competition, it is worth it to dive into mining Bitcoin. The current landscape favors large mining farms and discourages small operations. If you’re planning to mine cryptocurrencies by yourself, you’ll have to spend a pretty big budget on power bills and equipment.

Fortunately, there is an effective alternative that doesn’t require that much expenditure. If you want to start mining and don’t enjoy a big budget, you can always turn to mining pools, which have proven very effective for combining hash power to maximize mining rewards. Mining pools have turned an impossible mission like low-budget mining into a profitable operation.

Closing thoughts

Mining cryptocurrency, whether it’s Bitcoin or any other, is not only an investment opportunity. It is also a contribution to the network and a bet that it will become mainstream in the future.

The mining landscape changes frequently and rapidly, so it’s tough to predict where we will be years or even months from now. For sure, mining will remain profitable as long as Bitcoin keeps moving towards mass adoption. However, it may be less sustainable during bear markets, so we need new products that hedge against drops in Bitcoin prices.

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An extensive library of newsworthy, analytical, and educational content regarding cryptocurrency and crypto mining. By Lumerin Protocol, built by Titan Mining.

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Making crypto mining hashpower a tradeable commodity. Built by Titan Mining. Visit us on

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