Understanding how Bitcoin is Mined
                     UNDERSTANDING HOW BITCOIN IS MINED
What is Bitcoin?
• Bitcoin is the first decentralized digital currency that allows peer-to-peer 
transfers without any intermediaries such as banks, governments, agents or 
brokers, using the underlying technology of blockchain. 
• Anyone around the world on the network can transfer bitcoins to someone else 
on the network regardless of geographic location.
Source: simplilearn.com
Bitcoin Advantages
• Compared to traditional currencies, assets can be transferred faster on the 
bitcoin network. 
• The system also has lower transaction fees, because it’s decentralized and 
there are no intermediaries, and it is cryptographically secure.
Source: investopedia.com
What Is Blockchain?
• Blockchain is the underlying technology of bitcoin. Blockchain is a public 
distributed ledger in which transactions are recorded in chronological order. 
• A block is the smallest unit of a blockchain, and it is a container that holds all 
the transaction details. 
Source: investopedia.com
Primary attributes of Blockchain?
• Previous hash: This attribute stores the value of the hash of the previous block.
• Data: This is the aggregated set of transactions included in this block
• Nonce: The nonce is a random value used to vary the output of the hash value.
• Hash: This is the value obtained by passing the previous hash value, the data 
and the nonce through the SHA-256 algorithm.
Source: simplilearn.com
What is Bitcoin Mining?
• Cryptocurrency mining is painstaking, costly and only sporadically rewarding. 
• Nonetheless, mining has a magnetic appeal for many investors interested in 
cryptocurrency because of the fact that miners are rewarded for their work 
with crypto tokens.
Source: altcoinbuzz.com
Bitcoin reward 
• The bitcoin reward that miners receive is an incentive which motivates people 
to assist in the primary purpose of mining: to support, legitimize and monitor 
the Bitcoin network and its blockchain. 
Source: investopedia.com
What Coin Miners Actually Do
• Miners are getting paid for their work as auditors. They are doing the work of 
verifying previous bitcoin transactions. 
• This convention is meant to keep Bitcoin users honest and was conceived by 
bitcoin's founder, Satoshi Nakamoto. 
• By verifying transactions, miners are helping to prevent the "double-spending 
problem." 
Source: coinpedia.org
Double-spending problem
• Double spending is a scenario in which a bitcoin owner illicitly spends the same 
bitcoin twice. 
• With physical currency, this isn't an issue: once you hand someone a $20 bill to 
buy a bottle of vodka, you no longer have it, so there's no danger you could use 
that same $20 bill to buy lotto tickets next door. 
Source: Bitcoin Wiki
Verification
• Once a miner has verified 1 MB (megabyte) worth of bitcoin transactions, 
known as a "block," that miner is eligible to be rewarded with a quantity of 
bitcoin.
• The 1 MB limit was set by Satoshi Nakamoto, and is a matter of controversy, as 
some miners believe the block size should be increased to accommodate more 
data.
Source: bitcoin.com
Key Takeaways
• By mining, you can earn cryptocurrency without having to put down money for it.
• Mining rewards are paid to the miner who discovers a solution to a complex 
hashing puzzle first.
• You need either a GPU (graphics processing unit) or an application-specific 
integrated circuit (ASIC) in order to set up a mining rig.
Source: investopedia.com