What is Bitcoin Mining?
The process of validating transactions and adding them to the blockchain by solving complex mathematical puzzles. Miners compete to find a valid hash for a new block and receive newly minted bitcoin as reward.
Why It Matters
Mining is Bitcoin's heartbeat. Miners validate every transaction, arrange them into blocks, and secure the network through computational work. Mining creates new bitcoin, distributing it as incentive for miners to do the work. The mining reward is Bitcoin's only method of initial distribution—no government or company created bitcoin from nothing; it was mined into existence. Mining also secures Bitcoin against attacks by making it computationally expensive to rewrite history. If an attacker wants to reverse transactions, they need to redo all the mining work, which costs enormous amounts in electricity and hardware. As mining rewards decrease through halvings, transaction fees will increasingly incentivize mining, eventually replacing block rewards as miners' primary income.
How It Works
Miners collect pending transactions from the mempool and group them into a candidate block. They add a special number called a nonce and calculate the block's hash. If the hash meets the difficulty target (a certain number of leading zeros), the block is valid and they broadcast it to the network. If not, they increment the nonce and try again. This brute-force searching for a valid hash is the "work" in Proof of Work. The difficulty automatically adjusts so blocks are found approximately every 10 minutes on average. The first miner to find a valid block wins the block reward (currently 3.125 BTC plus transaction fees) and gets to include a "coinbase" transaction crediting themselves with the reward.