What is Bitcoin Mining | How it works

Concept of Blockchain

To understand Bitcoin Mining, understand the concept of blockchain first. All the cryptocurrencies in this world work on the underlined technology of Blockchain. Blockchain is a publicly distributed ledger of transactions recorded in chronological order made in bitcoin or any other digital cryptocurrency. Its sudden features are;

  • It is encrypted cryptographically, signed with your private key, and shared with the public key of the network.
  • It is immutable, any record, any transaction made on a blockchain cannot be changed.
  • It is run by a decentralized system, there is no centralized body or authority.
  • All the transactions are stored in a container-like structure called a block.



A block is the smallest unit of a blockchain that records all the information of transactions. A basic structure of a block is described below.

Structure of Block

The structure of a block has four layers which are the primary attributes of a block.

1. Previous Hash:

  The previous hash attribute stores the value of the previous block’s hash, and that’s how the blocks are attached.

2. Data:

  Data is the aggregated set of transactions that are included in this block. These are a set of transactions that were mined, validated, included in the block.

3. Nonce:

  In the proof of work (the process of transaction verification done in the blockchain), consensus algorithms are used in bitcoin. A nonce is a random value used to modify the output hash value. Therefore, each block must generate a hash value, and the nonce is the parameter that generates the hash value.

4. Hash:

  Hash is the resultant hash value obtained by passing the previous hash value, the data, and the nonce through the sha-256 (a cryptographic hash algorithm that produces a unique 256-bit alphanumeric hash value for any given input) algorithm to generate the hash of this block. This is the digital signature of the block that is generated and this is the identity of this block.

Concept of Bitcoin Mining

Bitcoin mining is the process of verifying bitcoin transactions and recording them onto the public blockchain ledger. In this blockchain, transactions are verified by users. So essentially transactions will be validated by other network participants with the necessary hardware and computing power and those entities are called miners. There is nothing like a centralized body as in the case of legacy transactions where we used to be dependent on a regulatory or governing body or a bank to make our transaction go through.

Who can participate in Bitcoin Mining

Any user who has mining hardware and internet can be a participant. A computer with mining hardware can be part of contributing to the mining community.

How to mine Bitcoin?

The process is solved based on a difficult mathematical puzzle called proof of work. So every miner’s job is to solve this mathematical puzzle to validate the transaction to earn the reward. All the miners are competing among themselves to solve a particular mathematical problem and the miner who solves this puzzle first will get the reward.

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