Bitcoin Mining: Everything You Need to Know

Bitcoin mining has been trending ever since its invention.

Previously it was only popular on Google, but now it has started gaining popularity among people.

If you are new to Bitcoin mining and want to get started, you may have questions such as:

• What is Bitcoin?
• What is Bitcoin Mining?
• How does Bitcoin mining work?
• What is Proof of Work?
• What is Bitcoin Mining Difficulty?

But before you can understand all this, you need to learn all the terms related to Bitcoin. we are Beginner’s Guide Likewise, it will take you less than 5 minutes to understand.

• Definition of Bitcoin
• What is a Bitcoin Address?
• Definition of public key
• What is a private key?
• What about blockchain? What is that?
• What is Bitcoin Mining?
• Bitcoin Rewards
• digital bitcoin wallet

So, once you’ve finished our 5-minute beginner’s guide to understanding Bitcoin terminology, you’re ready to take it to the next level.

Let’s get started.

What is Bitcoin?

Before understanding the Bitcoin mining process, let us help you organize your knowledge about Bitcoin and mining.

Here’s what Bitcoin is in layman’s terms.

What is a node?

A node is a computer that runs Bitcoin’s programs and connects to the Bitcoin network.

And the nodes (or computers) must be powerful and intelligent enough to understand the requirements, make their own decisions, and verify incoming transactions according to predefined rules.

If a transaction does not follow predefined rules, it will not be forwarded to other nodes in the network.

Once verification is confirmed, the node shares both types of transactions with other nodes on the Bitcoin network.

1. New Transactions – Transactions recently added to the network
2. Confirmed Transactions – Transactions that have been ‘confirmed’ and recorded on file.

A node maintains a ‘confirmed’ transaction block whenever it receives a confirmed transaction. These are placed together in a file or ledger called a blockchain.

For security purposes, a copy of the blockchain is kept at each node in the network. If any node does not have an up-to-date copy, it requests an updated copy from another node.

Now what happens to the new deal?

New transactions are sent back to the network until they reach the ‘confirmed’ transaction stage. And the process of bringing these new transactions to the blockchain is called mining.

How does Bitcoin mining work?

And let’s take a look at what Bitcoin mining is and how it works.

Now you know what Bitcoin, nodes, Bitcoin mining are and how the mining process works.

Based on the image above, new Bitcoins can only be created by solving a computerized math puzzle. And this is executed by nodes or miners (mining nodes).

Math puzzles are about finding numbers. Those numbers are within a certain range. The data available in the block must be combined and passed through a hash function. And this process helps you find that number and solve the puzzle. Well, this is no easy task.

So, understand why they are made so difficult to break.

Bitcoin mining is resource-intensive, and the only challenge is maintaining stability in the number of blocks a miner mines.

As you now know, Bitcoin mining serves two purposes.

1. Introducing the new Bitcoin in a decentralized way
2. Ensure only safe transactions take place

Now the question is how the node finds that number and solves the puzzle.

To solve this mathematical puzzle, miners (mining nodes) simply need to guess the corresponding random number. However, hash functions do not allow miners to easily guess the output.

Therefore, miners have to combine their guessed numbers with the available data in the block with the help of a hash function. And the result of this hash function is another hash that starts with some zeros.

Each combination will have a different result, so it’s impossible to guess which number will work.

The miner who can reach a certain range of desired numbers first declares himself the winner on the Bitcoin network.

So other miners now use their luck and effort to find another number in the queue.

Winning miners are rewarded with new bitcoins. This reward will continue to change as the reward rate changes.

What is the Bitcoin Network Difficulty Index?

Bitcoin network difficulty is a metric used to measure the difficulty ratio for finding new blocks.

It measures how difficult it is compared to how easy it is to find new blocks.

This metric is calculated every 2016 blocks based on how long it took a node to find the previous 2016 blocks. The desired rate for each block is 10 minutes, and it will take 2 weeks to compute 2016 blocks.

Therefore, for blocks prior to 2016, if it takes more than 2 weeks, the difficulty level is lowered. And, if it takes less than two weeks, the level of difficulty increases.

Released blocks that do not meet the required difficulty level are rejected by all miners available on the network and are therefore worthless. This means that each miner must ensure that blocks are released according to the difficulty ratio.

What are block rewards?

As I said earlier, the guide explains all the terms related to Bitcoin and here we explain block rewards.