Bitcoin Mining

What is Bitcoin Mining?

Bitcoin mining is the process of validating transactions and adding them to the blockchain. Miners compete to solve a cryptographic puzzle, and the winner earns new Bitcoin + transaction fees.

How Mining Works — Step by Step

1. Transactions broadcast to the network sit in the mempool
2. Miners select transactions (usually highest fee first)
3. Miner builds a candidate block with selected transactions
4. Miner repeatedly changes the nonce and hashes the block header
5. Goal: find a hash below the current difficulty target
6. First miner to solve it broadcasts the block
7. Network accepts the block — miner gets reward

The Puzzle — Proof of Work

Bitcoin uses SHA-256 (double). A valid block hash must have a certain number of leading zeros. The only way to find this hash is to try billions of nonces per second. This computational work is what secures Bitcoin.

TARGET: 0000000000000000000abc123...
Your hash must be LESS THAN this target
More zeros = harder puzzle = more work required

Why Does Mining Use Energy?

The energy isn't "wasted" — it's the security mechanism. Attacking Bitcoin requires outspending all honest miners combined. Energy expenditure IS the security budget. Miners increasingly use stranded/renewable energy that would otherwise be wasted.

Mining Pools

Individual miners join pools to smooth out income. Pools combine hashrate and share rewards proportionally. The largest pools control significant hashrate, which raises centralization concerns.