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Bitcoin Mining Basics


Bitcoin has gradually proven to be a crucial element of the current financial times especially with the increased reliance on technology in all fields around the globe. This currency has gained much popularity and is being used in many transactions including purchasing of other cryptocurrencies. It currently tops the list of the most profitable and popular digital currencies in the world.

Bitcoin is a decentralised virtual currency and unlike fiat currency, doesn’t have a central governing body; this currency is not controlled by anybody and is not generated depending on the decisions made by any country. Bitcoin runs on a public network; there, users carry out transactions that other users can follow making it very transparent. These transactions are spread along the network by Nodes which ensure that all parties involved are aware of any transaction taking place.

This information brings out a critical question that anyone interested in this cryptocurrency asks. Where do Bitcoins come from?

Bitcoin Mining

Bitcoin Mining is the process of transaction verification for Bitcoins where these transaction records are added to the general population record in the system known as the blockchain. The blockchain is framed by overlapping of blocks that relay information during the check confirmation procedure of a particular transaction. Bitcoin mining process is an integral component of the system; it is charged with the responsibility of introducing new Bitcoins into the market.

Mining can be carried out by any person; it involves getting transactions, compiling them into blocks and tackling computationally difficult tasks in the form of puzzles. One particular task can be carried out by many people. However, the first to solve it is able to add the block to the public ledger. Consequently, they are rewarded with transactional fees and an incentive for the newly formed bitcoins.

Terms Associated with Bitcoin Mining

Hash Rate

The hash is the scientific question that PCs utilized by miners need to unravel; hence, the hash rate is the speed at which the issue is being explained. This is essentially how mining is completed and new coins are discharged.

The hash rate is dependent on some factors such as the hardware and the number of miners. Hash Rate can be measured in:

Mega hash per second (MH/s)

Giga hash per second (GH/s)

Tera hash per second (TH/s)

Peta hash per second (PH/s)

Bitcoins in a Block

Each block in the network provides a reward to miners once transactions have been verified. More so, the number of bitcoins that are released for each solved block vary reduce every four years. The change occurs by halving the number of bitcoins being released. In its conception, the number of bitcoins released in each block were 50 and have gradually been halved to the current 12.5 bitcoins per block. This practice, coupled with bitcoin mining difficulty, is set in Bitcoin’s network to ensure that Bitcoin’s final coin is mined in 2140.

Bitcoin Mining Difficulty

The Bitcoin mining difficulty works hand in hand with the hash rate. The Bitcoin network operates in a way that a steady number of bitcoins are created at regular intervals of the mining procedure; normally 10 minutes. Subsequently, this implies that an increase in the hash rate makes it harder to mine the bitcoins. The less the miners, the less difficult it is to mine.

How Bitcoin Mining Works

Bitcoin mining is basically the process through which new coins are presented to the market. The term mining is used in this case to refer to the process of discovering and acquiring the coins. This process mirrors traditional mining processes and in particular, gold mining; both introduce new currencies and are dug out from their cores and most importantly they are rewarding.

The process of bitcoin mining requires any interested individual or organization to acquire a set of hardware and invest in its management. Technically, this means that a fast computer that can run many calculations per second is necessary for an effective miner. However, the electric power consumption of these computers and their cooling systems can prove to be at times a bit costly regarding the profits generated.

In the technical sense, bitcoin mining process involves running a cryptographic hashing function through a mining hardware on a block header. This is just utilizing the mining programming to utilize arbitrary values to figure the solution of the hashing function. The subsequent value or hash must be equivalent or lower than the coveted arrangement. Furthermore, it needs a specific number of zeros at the beginning. These calculations run as many times as possible within the system. The first miner that acquires the desired result gets to put the block into the blockchain and claim the reward; this usually occurs once within every ten minutes.

In the earlier days, desktop computers with normal CPUs had the capacity to support Bitcoin mining. With the increased popularity of Bitcoin and a relevant increase in the monetary value of Bitcoin Mining, this had to change.

The Evolution of Bitcoin Mining Hardware


Graphical Processing Unit was introduced about 2 years after the commencement of Bitcoin’s network. GPU took the place of the Central Processing Unit which had proven to be inefficient and time-consuming. There was a significant change in the number of Bitcoins mined; there was 50x to 100x more mining power provided by the GPUs. A particular system, the ATI Radeon 5870, was the GPU of choice as it was the most cost-efficient system.


The use of the Field-Programmable Gate Array paved way for the Bitcoin mining industry. This is primarily due to its energy efficiency which translated to a printable mining process. With the transition from GPU to FPGA, energy consumption greatly reduced; a 600MH/s graphical card could consume 600W whereas an 830MH/s FPGA mining device could consume only 80W of power. 


The Application Specific Integrated Circuit is termed as the end of the line mining technology as its far more superior than all the other mining technologies. This tool can be designed to specifically mine bitcoins only with a promise of over 100x more mining power from its predecessors.

The best Bitcoin Mining hardware system is based on its electric power efficiency and its Hash Rate capacity. With these two factors, we can conclusively say that the AntRouter R1, BPMC Red Fury USB, and the Antminer S9 are currently the best and most efficient Bitcoin miners available.

Bitcoin Cloud Mining

The initial cost required to set up a mining plant is high as the hardware required plus the energy consumption are expensive. This has the potential of locking out some interested bitcoin miners, a defect that cloud mining then cures. Cloud mining is the use of shared resources which are accessed online on any computer. Individuals pay so to be provided with mining services by companies which have invested in the required tools for mining.

This is particularly a positive channel of Bitcoin mining as it offers more comfort with less monitoring of the hardware involved. It is not always a bed of roses as fraud is a major concern as well as the lower profits earned as compared to mining with your own hardware.

There are three major types of cloud mining which include:

Virtually hosted mining

Leased hashing power

Hosted mining


Bitcoin mining is a difficult task as it is both costly and time-consuming. This is the desired property that the network’s developers aimed at maintaining as it is the property that ensures that Bitcoins are secured.

Proof of Work in this case thus simply means that the work done by miners has to be difficult and energy has to have been used in order to complete the mining process. This prevents any malicious persons from changing transaction details or even reusing a particular coin as once blockchains are created, it becomes more difficult and practically impossible to go through all the mining processes involved in creating this blockchain. The energy consumption for a single transaction verification is high and this makes it impossible for anyone to undergo the cost of undoing the many transaction verifications that have already been completed in a blockchain.


Bitcoin mining can be seen as a very lucrative investment but profits can only be realized through heavy investment in the hardware necessary in mining. This is because in the long run, more people will become miners hence fewer coins will be available per miner as the difficulty levels will increase causing a higher loss of energy among the miners. Bitcoin’s price fluctuations could also pose a threat as low prices result in losses even for successful miners in every block. Thus, buying Bitcoins still a better option for small-scale investors while Bitcoin mining remains a large-scale investor’s turf or security oriented miners who are not interested in mining profits.

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