Welcome fren! Bitcoin mining started when Satoshi mined the very first block in the blockchain, the genesis block, way back in 2009. But what is Bitcoin mining? Can you just dl an app and get some sweet bitcoins? No. That’s totally not how it works. But! In this massive guide we break everything down simply and answer every question that’s currently confusing you. LFG 🚀
What Is Bitcoin Mining?
Mining is the process of adding transactions to the Bitcoin blockchain.
Proof-of-Work (PoW) mining also performs two other critical functions in the Bitcoin network:
- Secures the network from attackers
- Issues / mints new bitcoins in a fair, automatic and distributed way
While many think the idea of having a digital currency was the “breakthrough”, it’s arguably more the PoW, mining and difficulty adjustment ideas that combined to be the true utter genius invention.
Before Bitcoin there were a slew of digital, cryptographic based currency attempts that all failed. It wasn’t until the mining process, PoW and the difficulty adjustment mechanism was fully fleshed out and laid bare by Satoshi that the digital cryptocurrency industry was truly born.
Before we go super deep into how Bitcoin mining works though, let’s quickly recap a couple of basic things, specifically what Bitcoin is and what the blockchain is.
What Is Bitcoin?
So what exactly is Bitcoin? Bitcoin is the first and most globally recognised cryptocurrency. It is a free, fully open source, decentralised and entirely digital currency for all.
OK explain Bitcoin to me like I’m 5: Bitcoin is online money that enables instant payments. Free for anyone, anywhere in the world to use at any time. It uses peer-to-peer technology (like torrents) and can be used without any permission from a government or central authority. It cannot be stopped or censored. Its rules cannot be changed, no matter how rich or powerful a country or person is.
Created by cryptographers (Cypherpunks technically) to cure the money problems caused by big governments and big banks it joins their other world changing technologies such as encryption of the Internet, encrypted messaging and the Tor project.
Some basic properties of Bitcoin:
- Limited Supply: There will only ever be 21 million bitcoins
- Distributed: All transactions are stored on thousands of computers all across the world
- Always Open: Unlike legacy banks, you can buy, sell, send or receive it globally, 24/7/365
- Transparent: The Bitcoin blockchain is public and viewable to anyone world wide
- Peer-To-Peer: No banks are involved, transactions go from one person to the other
- Permissionless: It can be used without having to ask anyone for permission
- Censorship Resistant: You’d have to stop the Internet to stop it
- Easily Divisible: 1 BTC can be divided into 100 million pieces called “Satoshi”
- Protected: The worlds biggest supercomputer made up of miners protect every bitcoin
- Final Settlement: Bitcoin transactions, once confirmed in a block are irreversible
- Pseudo-Anonymous: There are no names or accounts. It should be noted that it’s still possible to link Bitcoin Addresses to real life names if care is not taken to protect your Bitcoin Privacy
What Is The Blockchain?
Just like any type of money, Bitcoin needs a way of keeping track of who owns what bitcoins. This is referred to as a ledger and is essentially just a big database / book that is constantly updated to show who owns what. For example it might say “Bill owns 1 bitcoin”.
Obviously, having access to this ledger would mean having full control over all the value of the network. You could update it to say anyone owns any amount of bitcoins! Traditionally, this power was given to governments or kings… who would then abuse it. As they say, absolute power corrupts absolutely.
Instead, Bitcoin uses a new technology called a blockchain or distributed ledger technology to completely take humans out of the equation. This ensures there is no abuse of this power ever again.
When a transaction is broadcast and ownership of various bitcoins change hands, it’s bundled together into a “block”. This block is then added or “chained” onto all the existing ones. All these individual blocks, chained together form the blockchain which is stored on all Bitcoin Full Nodes.
A great way to visualise the blockchain and this process is to look at mempool.space as shown above. You can see each block – live! – as transactions from all over the world are added to it and then sealed forever into the ever growing Bitcoin blockchain. For example in the picture above, block 747310 has 1,093 transactions sealed in it.
The blockchain is immutable – meaning it can never be altered – and transparent. This means anyone, anywhere and at anytime can see any transaction that has ever happened on the Bitcoin network.
How Does Bitcoin Mining Work?
OK. Now that we’ve covered those basic things you should be in a much better position to understand the fully in depth explanation on how Bitcoin mining works. Let’s go!