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Cryptocurrencies have disrupted modern economics with their arrival and they are without a doubt one of the major innovations of the 21st Century. Cryptocurrencies allow you to send payments around the world without any third party involvement, that’s the main reason they have grown so popular and are likely to continue to do so. Bitcoin is the most valuable cryptocurrency in the world and in this guide, we will tell you what Bitcoin mining is and how it works. Let’s get into it.

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What is Bitcoin Mining?

Before we get to the technical details, let us tell you what mining is. Bitcoin mining is a decentralized computational process which is used for two purposes. The first purpose is to confirm the transactions in a Bitcoin network and the second purpose is to issue new bitcoins to miners which they can later sell to earn fiat money. For example, if you want to conduct a transaction on the Bitcoin network, Bitcoin miners will verify your transaction and record the transaction on the blockchain. To do this they will have to complete a computation known as ‘proof of work’. After they solve the computation successfully, they will add a new block to the blockchain and your transaction will be approved.

What are Nodes?

Bitcoin is powered by a Blockchain, a decentralized ledger, that’s maintained by hundreds of nodes around the world. Nodes are ‘librarians’ that keep a record of all transactions. A node is a computer running the bitcoin software and helps support the bitcoin network by keeping track of all transactions. When a transaction comes onto the network, nodes pass the information from one node to another and once the information is transmitted to all nodes, the miners (mining nodes) pick that information up to perform mining.

The simplest explanation is that nodes help the network run by keeping a record of all transactions, while miners put blocks into the network.

The Blockchain cannot be tampered with and transactions cannot be deleted. Nodes are synchronized and they are able to check if any data doesn’t comply with the bitcoin protocol. Any rogue node will be detected easily by comparing it with the rest and it will then be simply removed.

What is Proof of Work?

Proof of work is a protocol which is used by Bitcoin and other popular cryptocurrencies such as Ethereum. This is an algorithm that miners use to confirm transactions and produce new blocks. Miners around the world are trying to solve this mathematical puzzle, and a miner who manages to solve it, adds a new block to the Blockchain and passes that information to the nodes. The other miners then stop working on that block, and try to solve the next one, and so on. The miner who succeeds in solving the puzzle gets the transaction fee from users that initialized the transaction and is rewarded with the new bitcoin generated by the system.

The whole process may seem very simple but it is very complex and requires a lot of hashing power to perform.

Mining Difficulty

Bitcoin has a limit of 21 million coins and so far around 17 million coins have been mined. It is expected that 99.9% of the coins will be mined by 2021 and the rest of the coins will be mined over the next 100 years. Bitcoin’s issuance of coins is regulated by difficulty. Simply put, mining difficulty is the complexity of the algorithm that miners need to solve in order to create the block. It changes roughly every 2016 blocks.

Block Reward

As we mentioned, Bitcoin miners get their reward whenever their block is accepted onto the Blockchain. Bitcoin is designed in a way that the reward halves every 210,000 blocks and it will continue to decrease over the next few years. The current Bitcoin reward is 12.5 bitcoins which will be halved to 6.25 coins on 25 May 2020.

Bitcoin Cloud Mining vs Traditional Mining

Anyone can be a miner. All you have to do is to buy the equipment and start creating new blocks. But there are a few problems you need to consider. You will need powerful hardware with a fast processor and the costs of the electricity to run it could be very high. Bitman is one of the most popular producers of ASIC miners.

Another alternative is to use bitcoin cloud mining. Cloud mining allows you to purchase hashing power from data centers owned by private companies. Cloud mining has many benefits over traditional bitcoin mining, such as:

  • No electricity costs
  • No maintenance cost
  • No excessive heat produced by mining equipment
  • Affordable

If you are into bitcoin cloud mining, then ensure that you check out the reviews on service providers. The most popular providers at the moment are Genesis-Mining and NiceHash. Hashflare is also considered a reliable provider, but some of their recent moves have drawn a lot of criticism.


Bitcoin Mining is a complex process and we have tried our best to explain it as simple as possible. There are still a lot of things that we have left unexplained, but it’s important that you have learned the basic concept of how Bitcoin mining works. If you are interested in learning more about the Bitcoin then visit our page with some other useful guides.