What Is Bitcoin Mining?



Bitcoin mining is the process of creating new bitcoin by resolving puzzles. It consists of calculating systems equipped with specialized chips competing to solve mathematical puzzles. The first bitcoin miner (as these systems are called) to solve the puzzle is rewarded with bitcoin. The mining process also confirms transactions on the cryptocurrency's network and makes them trustworthy. 

For a short time after Bitcoin was launched, it was mined on desktop computers with regular central processing units (CPUs). But the process was extremely slow. Now the cryptocurrency is generated using large mining pools spread across many geographies. Bitcoin miners aggregate mining systems that consume massive amounts of electricity to mine the cryptocurrency. 

In regions where electricity is generated using fossil fuels, bitcoin mining is considered detrimental to the environment. As a result, many bitcoin miners have moved operations to places with renewable sources of energy to reduce Bitcoin's impact on climate change.

Detail

Mining is a record-keeping service done through the use of computer processing power.[f] Miners keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block, which is then broadcast to the network and verified by recipient nodes.[25] Each block contains a SHA-256 cryptographic hash of the previous block,[25] thus linking it to the previous block and giving the blockchain its name.[6]: ch. 7 [25]


To be accepted by the rest of the network, a new block must contain a proof-of-work (PoW).[25][g] The PoW requires miners to find a number called a nonce (number used once), such that when the block content is hashed along with the nonce, the result is numerically smaller than the network's difficulty target.[6]: ch. 8  This proof is easy for any node in the network to verify, but extremely time-consuming to generate, as for a secure cryptographic hash, miners must try many different nonce values (usually the sequence of tested values is the ascending natural numbers: 0, 1, 2, 3, ...) before a result happens to be less than the difficulty target. Because the difficulty target is extremely small compared to a typical SHA-256 hash, block hashes have many leading zeros[6]: ch. 8  as can be seen in this example block hash:


By adjusting this difficulty target, the amount of work needed to generate a block can be changed. Every 2,016 blocks (approximately 14 days given roughly 10 minutes per block), nodes deterministically adjust the difficulty target based on the recent rate of block generation, with the aim of keeping the average time between new blocks at ten minutes. In this way the system automatically adapts to the total amount of mining power on the network.[6]: ch. 8  As of April 2022, it takes on average 122 sextillion (122 thousand billion billion) attempts to generate a block hash smaller than the difficulty target.[41] Computations of this magnitude are extremely expensive and utilize specialized hardware.[42]


The proof-of-work system, alongside the chaining of blocks, makes modifications of the blockchain extremely hard, as an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted.[43] As new blocks are mined all the time, the difficulty of modifying a block increases as time passes and the number of subsequent blocks (also called confirmations of the given block) increases.[25]


Computing power is often bundled together by a Mining pool to reduce variance in miner income. Individual mining rigs often have to wait for long periods to confirm a block of transactions and receive payment. In a pool, all participating miners get paid every time a participating server solves a block. This payment depends on the amount of work an individual miner contributed to help find that block.