What is Bitcoin Mining?

Bitcoin is based on the principle of public verification of transactions: if many users see that a certain number of coins have been given by A to B, then this transaction is verified and recorded in a general ledger.

Bitcoin miners have two crucial roles:

  1. To maintain the security of the system
  2. To create new bitcoins



Each bitcoin transaction is encrypted into a mathematical problem that the miner needs to process. This work involves millions of calculations per minute, and therefore requires strong mining hardware. Also, these calculations become increasingly difficult over time, which helps ensure mining speed does not surge along with the constant expansion of computing power.

  • Within the context of one transaction, mining means finding the mathematical proof of a bitcoin transfer and bundling it up with other transactions into a block.
  • One block contains several transactions (all those completed in the past 10 minutes). When all these transactions are confirmed as valid, we say that “a block is mined.”
  • A new block is the result of the decentralised computing effort of many rigs operating around the world.

Miners do this work for two types of reward:

Block Reward

The block reward is a fixed number of bitcoins created with the mining of a new block. The first miner (or mining pool) to find the block reaps the reward. To date, block rewards are the main income source for miners.

Transaction Fees

Transaction fees are fees that a party of the bitcoin transaction may pay to miners for processing a payment. Transaction fees are low and apply mostly in cases of urgent transactions. Most BTC payments are still free of charge because miners work for the block reward.

Anyone can become a miner if he is prepared to buy a mining rig; join a mining pool; and dedicate some time, money (energy bill) and effort to mining bitcoins.

Transaction data

Besides transaction data, miners also use the hash of the latest existing block, which means that fraudsters would need to do all the computing work associated with all previous blocks if they wanted to manipulate a block. This feat would require astronomical computing power and would be quickly noticed by other users.


Once a miner (or mining pool) has created a new block, all the transactions in that block get confirmed and permanently recorded in the block chain. The successful miner is rewarded with the fixed amount of new bitcoins created in the process.