How Bitcoin Mining Works

You think of coins being removed from the ground when you get word of bitcoin “mining”. Why call it mining when bitcoin isn’t a piece of material?

This is because it resembles gold mining in that the bitcoins dwell in the design of the protocol (similar to gold dwelling underground), but they have not been exposed into the light yet (same as the gold has not yet been dug up). There is a stipulation that at some point, there will be 21 million bitcoins in existence. They are brought out a few at a time by “miners”.

This is done as a reward for building blocks of legally valid transactions and adding them in the blockchain.

Nodes

The bitcoin software is run by a powerful computer which aids preserve bitcoin by taking part in the passing along information, known as the node. The node can be run by anyone, once the free and available bitcoin software is downloaded and a particular port is left open (the consumption of energy and storage space is a downside – it takes up about 145GB of the network at the time).

Nodes widely disperse bitcoin transactions round the network. Information will be sent from one node to a few nodes that it knows, who will then pass the information on to other nodes that they know, and so on. Such that it ends up going around the whole network pretty fast.

Solving the puzzle

How is this number found? By predicting at random. The hash function makes it difficult to predict what the yield will be. The mystery number is guessed by miners and then used on the hash function to the grouping of that predicted number and the data in the block. The subsequent hash has to begin with a pre-established number of zeroes.

Economics

The reward is 12.5 bitcoins at the time of inscribing, which at time of inscription is worth almost $200,000.
While it’s not almost as easy a deal as it sounds. There are many mining nodes contending for that reward, and it is a matter of fate and computing power

Difficulty

The struggle with the calculation is accustomed regularly, such that it takes on typically about 10 minutes to develop a block.
Why does it take 10 minutes? That is the period that the developers consider is needed for a stable and falling flow of new coins until the highest number of 21 million is attained (expected in 2140).

If you’ve made it this far, then congratulations!