02-26-2023 icon

Bitcoin Mining: What it is and important things to know

By Lucy Adegbe
Bitcoin mining

Have you ever wondered where the blocks that form the Bitcoin blockchain (chain of blocks) come from? The blocks are formed through the process of Bitcoin mining.

The blockchain is a public ledger and the mining process involves the creation of valid blocks containing records of Bitcoin transactions. Mining aims to address the issues of double-spend and is a crucial part of the Bitcoin network.

Here, we’ll take a look at the process of mining and some important things to know about the process.

Bitcoin mining: What is it and how does it works?

Bitcoin mining is the process of adding new transactions to the blockchain network by solving complex mathematical problems using specialized computer hardware and software. The mining process aims to solve the issue of double-spend which entails finding consensus on a history of transactions. This ensures no single coin is spent twice.

To under how mining works, the steps outlined below explain the process.

  • Transactions: The Bitcoin network operates on a peer-to-peer basis, where users can send and receive bitcoins directly without intermediaries such as banks or payment processors. When a user initiates a transaction, it is broadcast to the entire network.
  • Verification: Miners verify the transaction by checking the digital signature and ensuring that the sender has sufficient bitcoins to complete the transaction. Once the transaction is confirmed, it is added to a pool of unconfirmed transactions known as the mempool.
  • Block Creation: Miners compete to create a new block containing a set of verified transactions. To do this, miners use specialized software to solve a complex mathematical problem, known as the proof-of-work algorithm. The first miner to solve the problem and create a valid block is rewarded with newly minted bitcoins and transaction fees.
  • Validation: Once a miner creates a new block, it is broadcast to the network for validation. Other miners in the network check the block’s validity and ensure that it conforms to the rules of the Bitcoin protocol.
  • Chain Creation: Once the block is validated, it is added to the existing blockchain, creating a new link in the chain. This process continues, with miners competing to create new blocks and add them to the blockchain.
  • Halving: The mining reward for creating a new block is halved every 210,000 blocks (approximately every 4 years), reducing the rate at which new bitcoins are created. This is designed to limit the total number of bitcoins in circulation to 21 million.

Bitcoin mining: Important things to know

There are some important things to know about the mining process. This includes the energy consumed, hardware required, and regulatory effect.

Energy consumption and hardware requirement

Bitcoin mining requires a significant amount of energy, as the process involves solving complex mathematical problems that require a lot of computational power. This has led to concerns about the environmental impact of Bitcoin mining, as it consumes a lot of electricity, mainly from non-renewable sources

Bitcoin mining requires specialized hardware, such as application-specific integrated circuits (ASICs) or graphics processing units (GPUs). These hardware devices are designed specifically for mining and are much more powerful and efficient than standard computer hardware.


Mining is currently legal in most countries, but there are some countries where it is banned or heavily regulated. It is important to check the legal status of Bitcoin mining in your country before investing in mining hardware. Additionally, some governments have raised concerns about the energy consumption of Bitcoin mining and are considering regulations to limit or prohibit mining activities.

Overall, Bitcoin mining is a competitive process, with miners using specialized hardware and software to solve complex mathematical problems and create new blocks for the blockchain network. The process is designed to be decentralized, with no central authority controlling the network, and the reward system is set up to incentivize miners to continue adding new blocks to the chain.