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Crypto 101: Bitcoin Mining - What is it and how can I mine?

By SylarHeisenberg | blockchain-blog | 17 Apr 2020

In Bitcoin Mining, computers calculate new BTCs.

What is Bitcoin Mining?

Bitcoin Mining is a process in which computing power is made available for transaction processing, securing and synchronizing all users in the network. Mining is a kind of decentralized Bitcoin data center with miners around the world. This process is called mining in analogy to gold mining. Unlike gold mining, Bitcoin mining rewards useful services. The payment of the respective Bitcoin shares depends on the computing capacity made available.

In traditional fiat currency systems, governments or central banks print more money when needed. With Bitcoin, no money is printed. Rather, Bitcoin is mined in the cloud (Cloud Mining). Around the globe, computers mine (calculate) Bitcoins and compete with each other.

How does Bitcoin Mining work?

Around the clock people transfer Bitcoins via the Bitcoin network. The Bitcoin network handles these transactions by collecting all transactions of a certain period of time and putting them together in a list - the so-called block. It is the job of the miner or prospector to confirm these transactions and enter them into an account book. He is paid for this in Bitcoin (the Bitcoin transaction fee).

Create a Hash

The account book is a long list of all blocks. It is also known as the block chain. The block chain is used in Bitcoin mining to be able to trace all transactions at any time. Whenever a new block is created, it is added to the block chain. This results in a seemingly endless list of all transactions ever made. The block chain can be viewed by everyone. Accordingly, every user can see which transaction is being carried out. However, it is not possible to see who is carrying out this transaction. Thus Bitcoin is both transparent and pseudo-anonymous.

How can it be ensured that the block chain remains intact and is never manipulated?

This is where the miners come in. Once a block of transactions has been generated, Miners run a process on that block. They take the information and apply a mathematical formula that converts the transaction into something much shorter, actually just a string of letters and numbers. This is also called a hash. This hash is kept in the block at the end of the block chain.

Hashes have some interesting properties. It is quite easy to create a hash from the information in the Bitcoin block, but it is almost impossible to see what the hash was before. Also note that each hash is unique: if only one character in the block is changed, the entire hash changes.

To create a hash, the miners use not only the data of the transaction in the block, but also other additional data. Part of the data is the hash in the last block of the block chain.

Since each hash of a block uses the hash of the previous block, a kind of wax seal is created. It confirms that the current block and the block before it are valid. If someone would try to manipulate a transaction by changing the block that is already in the blockchain, he would have to change the hash as well. If someone checks the authenticity of the block with the hashing function, you would immediately notice that the hash does not match the one in the block chain. The block would immediately be revealed as a fake.

The competition for the Bitcoins

The miners compete with each other in the search for new blocks. Each time someone successfully creates a hash, they currently still receive 12.5 Bitcoins. The blockchain gets an update through the hash and everybody gets to know about it. This incentive system rewards the mining that keeps the transaction processing going.

The problem is that it is very easy to create a hash from a data collection. So the Bitcoin network has to make it more difficult, because otherwise everyone would hash hundreds of blocks per second and all Bitcoins would be mined in a few hours. The Bitcoin protocol accordingly makes it intentionally more difficult for miners by introducing a so-called proof of work - the mining difficulty increases over time.

The Bitcoin network would not simply accept every old hash. Rather, the block hash must have a certain appearance, such as a certain number of zeros at the beginning. There is no way to know what a hash looks like until it has been produced, because it changes its appearance completely with every piece of data added.

Miners should not interfere in the transactions in the block. However, they must change the data they are using to create a new hash. They do this by using a different piece of data again. This record is also called a nonce. It is used together with the transaction to create a hash. If the hash does not find the desired format, the nonce is changed and the whole hash changes again.

Usually many attempts are necessary to find the right nonce. Therefore the miners usually work at the same time in the same network. Once the nonce is found, the bitcoins are distributed among all miners according to their performance. This is how miners ultimately earn Bitcoins.

What do you need to mine Bitcoin?

There are different ways to mine Bitcoins. Firstly, you can mine Bitcoins from home using so-called ASIC miners.

Mine Bitcoins yourself

Popular Bitcoin Miners are the Antminer. The Miners are simply connected to a router via LAN cable. They can then be configured via the web browser. No additional device or software is required, as they are standalone miners. The latest miners now also have an integrated power supply unit.

If you want to mine Bitcoin yourself from home, you will need the latest Antminer.


On of the most efficient Bitcoin Miner is currently the Antminer S17 with up to 62 TH/s from ProTact. The miners are simply connected to a router via LAN cable. They can then be configured via the web browser. No additional device or software is required, since they are standalone miners. The latest miners now also have an integrated power supply unit.

Of course the mining can also be operated professionally on a larger scale. CryptoBoost for example offers a complete package. It consists of a fully remotely controllable 144 miner container, a secure location with cheap and green electricity and all the services around. If you are an investor who wants to invest professionally and take advantage of opportunities, you can do so through an investor-owned company. The establishment of such a "Legal Unit'" is also part of the CryptoBoost service.

Mining Pool

Mining pools work according to the idea of collective mining. After all, it takes much longer to find new blocks if you mine alone. It is almost hopeless, because the required computing capacity would be much too large. The so-called mining pools provide a remedy here. Here the required computing capacity of all users is bundled. So you can find new blocks much faster. The remuneration in Bitcoin is divided among the individual users according to the computing capacity they have used.

With the necessary hardware you can now register with a reputable mining pool and start mining Bitcoin collectively.

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I am a 33 year old businessman, based in Germany with a great passion for our monetary system, cryptographic currencies and marketing. I would like to share this passion with you here.


This is my blog in the areas of Blockchain, digital currencies and Bitcoin. I report on important developments in the digital currency markets and provide readers with a critical and independent assessment of the news situation.

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