How to Mine Bitcoin?

What is Bitcoin Mining?

Bitcoin mining is done by using a network of computers from around the world. The bitcoin mining process can be predominantly defined as the addition of transaction records to the bitcoin's public ledger.


These transactions are done by users in the bitcoin blockchain continuously and recorded in the public registry. A single entity records all transactions.

The Bitcoin Blockchain Management

The Bitcoin ledger known as Bitcoin Blockchain is managed and maintained by several independent entities. It offers unmatched flexibility compared to centralized ledgers. As bitcoin is devoid of any single management authority, there has to be an agreement among users on a common ledger. New transactions are converted into lists called blocks and added to the Blockchain. Gradually, it creates a long list which covers every single transaction that is done in the bitcoin network.

The job of the miners is to confirm the creation of blocks and write them in a ledger. The block gets added to the public ledger which has all recorded transactions. All users can update their individual copies of the transaction ledger as the block is broadcast over the bitcoin network.

It is important to ensure that the Bitcoin Blockchain is never tampered. This responsibility of taking care of Bitcoin Blockchain is of miners.

When the block creation is completed, the miners start solving cryptographic problems in order to add block to the Bitcoin Blockchain. A specific formula is applied to the information provided in the block that converts the data into a random series of letters and numbers called the cryptographic hash function. The hash associated with each block must deal with a specific restriction as provided in the formula.

What are Bitcoin Hashes?

Hashes are designed and created using a collective data such as bitcoin block. You cannot decode the hash by working backwards. It is practically impossible.

Producing a hash from a large amount of data is easy as each hash is unique. However, the hash is a complicated element in the whole bitcoin mining process. A mere change of a single character in a block of transactions will result in compete change of the hash of the block making it impossible to generate a valid hash. Miners are required to use specialized hardware to achieve the objectives.

When hashing a block, miners also use the hash from the last confirmed block in the Bitcoin Blockchain and do not merely focus on transactions. In other words, each block reference the previous one, thus become a digital version of a wax seal and establish the legitimacy of every block. Any attempt to fake a block by a rogue element would be next to impossible as it would entail investment of millions of dollars.

How Bitcoins are earned?

To earn a bitcoin, miners must solve a specific block hash problem related to the Bitcoin protocol. When they solve the problem successfully, they get rewarded in two parts - a newly created bitcoin and fees from the transactions included into the block. In 2016, 25 new bitcoins were generated from each block while the transaction fees were about 0.5 bitcoin.


Miners do not verify every transaction but authenticate many of them at once. The transactions are secured within a box with a virtual lock. Software systems are deployed to locate the key for unlocking box. Once the box is opened, the transaction is confirmed following which the miner receives 12.5 bitcoins. This is easy to say; however difficult to do as the key is not easy to locate. The attempt average is a whopping 1.7 billion. Miners, who use the right tools in a right manner get rewarded.

Tools Needed for Mining

The most basic tool needed for mining is a Bitcoin Wallet. It is an encrypted online bank account designed to store the earnings of the miners during the Bitcoin mining process. Make sure that the right tools are used for bitcoin mining to achieve best results.

In the initial years, miners used simple CPUs to mine bitcoins as they were powerful enough to deal with the tasks. With the time, as codes became more complicated and difficult to crack, then miners started using GPUs on graphic cards which were 100 times faster than CPUs. However, with advancing technology, these have become defunct today.


FPGA Bitcoin Mining

FPGA stands for Field-programmable Gate Array enables mining manufacturers to buy chips and customize the same for mining before using them in the equipment. This technology provides better performance in comparison to CPUs and GPUs.


ASIC Bitcoin Mining

ASIC stands for Application-specific Integrated Circuits are the latest cutting-edge tools used in Bitcoin mining. These tools can be used for mining bitcoins at amazing speeds. It can save miner’s huge sums of money on electricity bills. These chips are expensive and designed for a particular task. Most of the miners prefer using them as they are worth the investment.

Bitcoin Software

The choice of Bitcoin equipment and software must be compatible to make it work.


Standard Bitcoin Client

This type of software is used for sending data between the Bitcoin network and the miner and allows users to interact with the clients.

Bitcoin Mining Software

This software is at the core of successful crypto-currency mining and used for the ASIC miner except in some new models.

Acquiring all the equipment and software can push up the total cost of mining bitcoin. One of the most successful miners by the name of Eric says - he spent over $50,000 on CPUs, graphic cards, memory cards, circuit boards and memory. The cost of using water cooling technology and electricity can also escalate costs quickly.

Miners are now pooling together their funds and resources to reduce expenses and workloads, and to increase operational efficiency. The commonly used methods are:



This software is at the core of successful crypto-currency mining and used for the ASIC miner except in some new models.



TIn this method, miners are allowed to earn shares until the pool finds a block. Thereafter, each user gets a fixed number of shares within the round that is calculated using a proven formula.


Bitcoin Pooled Mining

Also known as the slush system, in this system older shares are given less preference as compared to recent shares. There is scarce chance of tricking the mining pool system by switching pools.