Bitcoin Mining – Learn The Working Of Mining At Home Or For Business

Today’s post is based on what is Bitcoin mining?

Nowadays Bitcoin is the most searched topic of 2017 according to the google search engines. As a huge amount of crowd is investing in Bitcoin with the only purpose of gaining a high percentage of profit so the price is also increasing with the traders.

However, investors, trading market, exchange platform all the things are upgrading but around 80% of traders don’t know about Bitcoin mining and how does Bitcoin mining works?

So today’s Aim of writing this post is to help our friends to understand all about Bitcoin mining, what exactly is Bitcoin mining and how does bitcoin mining works?

Well before starting this post I want to say personally that understanding how does Bitcoin mining works is the most difficult part of Bitcoin but also the most crucial part for those who trade on Bitcoin not just for profit but as a Business income.

Coinmama: Buy Bitcoin with Credit Card

So let’s start…

What is Bitcoin mining ?

Bitcoin mining3

Bitcoin mining for the understanding of a common man I would like to say it is just like Gold mining. As in the Gold mines, Golds are extracted from the rocks so in terms of Bitcoin it is extracted from the source.

The only difference between them is Bitcoin is not a real currency it’s a virtual currency. As we know golds are limited but we don’t know the exact value same goes for the Bitcoin but here we know the exact value of Bitcoin limitation that is 21 Million.

Now coming to the technical terms it is a decentralized platform that serves two purposes:

  • Confirms the transaction in a trustful manner when enough computational effort is devoted to a block.
  • Issues new Bitcoin in each Block.

Bitcoin mining is the process which is not done by people or companies. Mining is done by thousands of computers all over the world that are all connected to the internet. The computers are referred as ‘miners’, but in a simple language they are just ‘computers that process transactions’.

Bitcoin mining requires a computer and a special program. Miners use this program with a number of computers resources to compete with other miners in solving complicated mathematical problems.

About every ten minutes miners try to solve a block that has the latest transaction data in it, using cryptographic hash function and special programmes.

Miners are the crucial part of Bitcoin circuit. Miners are used for securing the network and for the processing of each Bitcoin transaction. So without miners, the network can collapse and will lose all value. By providing this service miners receives newly created Bitcoin and transaction fees.

Where do Bitcoins come from ?

Bitcoin mining is a structure used to rectify Bitcoins into the network. When a Transaction is made between two bitcoin addresses, they are broadcasted on the whole Bitcoin network.

Now the Bitcoin mining computers and programmes read this transaction and they add these transactions to their Block.

Bitcoin mining4

Adding a transaction in a Block is the first incentive for Bitcoin miners. After that each generated transaction for every Block of Bitcoin, Miners compete to solve a very difficult Algorithm.

The miner who solves this Algorithm wins some newly created Bitcoin as a reward for the competition. This is the second incentive for Bitcoin Miners.

What is Blockchain ?

If you want to understand the Bitcoin mining process than first you should understand the main part on which the whole Bitcoin network runs securely that is ‘Bitcoin Blockchain’.

Blockchains are virtually a public journal, shared freely, continually updated and under no central government and authority.

Bitcoin mining5

Bitcoin mining process by adding a new transaction to a block or get newly created Bitcoins as a reward for solving Algorithms are made so tough that this process will remain slow each day. Single blocks must contain a proof of work to be considered as a valid Block. Proof of work is verified by other Bitcoin nodes each time when they receive a Block.

All Bitcoins transactions are recorded in a Blockchain, in a continuous, time-stamped series of pack transactions known as blocks.

What is hashcash proof-of-work ?

What is hashcash proof-of-work

Proof-of-work is a method that ensures the given information (new block) was difficult (time-consuming, costly) to solve and match the data in the block.

Bitcoin uses the hashcash proof-of-work function. The main part of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant harmony. A proof of work is a bunch of data which is difficult to produce and needs to be verified by certain requirements. It may be difficult to match the requirements to satisfy the data.

Also creating a proof of work would be an aimless process with low chances. It has been said that a lot of trial and error is required as an average before a valid proof of work is generated.

What is Bitcoin mining Difficulties ?

  • Difficult Algorithmic problems

The hash of a Block must start with certain pairs of zeros. The chances of calculating a hash that starts with many zeros are very low. So miners always try numbers of attempts.

  • Metric difficulty of Bitcoin network

It is the measurement of difficulty level to find a new block compared to the easiest it can never be

The flow of Bitcoin is maintained under difficult Algorithms and proof of work problem regarding how quickly blocks are solved in a certain timeframe (roughly every 2 weeks or 2016 blocks.) difficulty level goes up and down with arranged hashing power to keep the average time between blocks around 10 minutes.

Is Minings waste of Electricity ?

Is Minings waste of Electricity ?

According to some business and financial experts, Mining is wasteful so as for electricity. Electricity should be distributed on useful works.

Let us take an example as Company A. here around 500 (assumption) employee works. They go home to the company and then the company to the bus. Doing this process they use public vehicles or personal vehicle.

Also, considering the cost of Electricity consumption of Company A with carbon emission by the employer of the company, Bitcoins environmental effect is nothing.

Block rewards percentage ?

About after every 2 or 4 years, the number of Bitcoin generated in this way is reduced by half as the Algorithm becomes tough and tough after every new block. As per now till 2017 over 16 million Bitcoin is mined. It cannot be mined after completion of 21 million and also not possible to create more like them.

As Bitcoin price is rising day by day as expected so the Mining will be a profitable business irrespective of the decreasing Block rewards.

Security provided by Majority Miners to the Bitcoin network ?

An attacker needs high mining power to maintain the longest chain by creating Blocks with a false transaction. In this case, the attacker can spend the same coin multiple times and also will be able to siege the transactions of other users. This attack is known as ‘51% attack.’ Implementation of the attack needs own Mining hardware.

The monetary on such attacks are done at a high-level cost with the other honest Miners Majority or you can say, group. The cost of the monetary is still not disclosed.

Bitcoin Mining Hardware comparison ?

Antminer S51,155,00019573121590Currenctly not availableGPL infringement
Antminer S5+7,722,000224733473,436NoGPL infringement
Whatsminer M311,500,0001785    –   –Available–           
Antminer s914,000,0001018258331,375AvailableGPL infringement
Avalon721 6,000,000      –        –    –AvailableNot cleared yet
Antminer U363,0001,000165863AvailableCode
Antminer S74,860,000400026661,210Currently not availableGPL infringement
SP20 Jackson1,700,000154512991100NoCode, Samples


Bitcoin Mining Pools ?

Satoshi planned everything well coordinated but failed to anticipate the emergence of Mining pools. Bitcoin Mining Pools are a group of cooperating Miners who agree to share Block rewards in equal proportion to their contributed Mining power.

What is Bitcoin Cloud Mining  ?

Cloud Mining enables users to purchase mining capacity of hardware in data centers. Bitcoin Cloud Mining used to earn Bitcoins without managing hardware, software, Electricity, Bandwidth and other online issues.

What is Bitcoin Cloud Mining 

Using this mode Bitcoin Mining is done in the cloud. This enables the owners to not deal with any of the hassles usually encountered when mining Bitcoin such as electricity, hosting issue, heat, installation, and trouble.

We will see certain Advantages and Disadvantages of Bitcoin Cloud Mining in below table:

                              Advantages                         Disadvantages
No excess heat to deal withNot all cloud mining is real. Some may be fraud.
Quiet good because of great activitiesUnverifiable or shady bitcoin cloud mining operations
No electricity costLow profit
No ventilation problems because of hot equipmentYou cannot create your own Bitcoin Hashing system


No need for Bitcoin mining hardwareLack of ability to change the Bitcoin mining software


How do Bitcoin Mining works ?

We will understand this whole procedure by using an example:

  • Suppose Alex wants to buy some goods from a broker at the cost of 1 BTC.
  • Alex will announce 1 BTC payment to the broker.
  • This process is known as a transaction.
  • Now on a propagation full nodes will check Alex’s spend against other pending transactions.
  • If the full nodes find everything fine then the transaction will be broadcasted to the Bitcoin network.
  • A full node is a special, transaction-relaying wallet which maintains a current copy of the entire blockchain.
  • For now, transactions are not yet confirmed.
  • So broker would be taking a big risk by sending any goods to Alex before the transaction confirmation and Miners are used for further steps.
  • They keep a complete copy of the blockchain and monitor the network for newly-announced transactions.
  • There are chances that Alex’s transaction would directly reach to the miner.
  • If a miner decides to work on the transaction to fit it in a Block.
  • For that, he will perform several operations to do that.
  • Here miners compete to fit the transaction in a Block for the ‘Package’ or fees.
  • Acceptable blocks include a solution to a proof of work computational problem, known as a hash.
  • More computing power gives the power to a miner for higher hash rates and higher the ratio of solving the current block.
  • Miners receive rewards in terms of Bitcoin for solving the block.
  • The first miner who will solve the block of Alex’s payment will announce the newly solved block.
  • Other nodes will verify.
  • If it seems to be valid the transaction will be done.
  • A new transaction will be added to the block.
  • The broker will send goods to Alex.
  • Then the entire process will be recycled for another
  • The minimum requirements of confirmations are Six.

Is Bitcoin Mining legal ?

It depends on your country and location with several circumstances. If you are mining in a country where Bitcoin is banned than obviously stealing electricity, mining Bitcoin you are breaking many laws.

There are very few countries where Bitcoin is banned and In most of the countries, Bitcoin is either unregulated or permitted.

Top countries where Bitcoin is Banned or Regulated ?

  • Bangladesh
  • Bolivia
  • China
  • Ecuador
  • Iceland
  • Russia
  • Sweden
  • Thailand
  • Vietnam
  • Kyrgyzstan

Also, the list is updated always so before mining please check whether your country supports Bitcoin mining or not?

How to Mine Bitcoins ?

  • Get Bitcoin Mining hardware.
  • You won’t be able to mine without an ASIC Miner.
  • ASIC miners are specialized computers that were built for the purpose of mining bitcoins.
  • I will suggest you that don’t mine your home desktop or pc.
  • The electricity bill will cost you more than profit.
  • After that select a mining pool.
  • Don’t mine without mining pool.
  • Mining without pool you would receive such a less amount which does not worth your hard work.
  • Another necessary equipment is Bitcoin Mining software.
  • You have to connect this software to your mining hardware.
  • You need to use the software to point your hash rate at the pool.
  • Mining software is available for Mac, Windows, and Linux.
  • Here you will have to tell the pool which Bitcoin address payouts should be sent to.
  • If you don’t have the bitcoin wallet or address learn how to get it
  • Make sure that Bitcoin Mining is legal in your country.

Is Bitcoin Mining profitable ?

Before starting Bitcoin mining You will need to calculate your things up. It depends on certain circumstances. Also depends upon individuals resources. So you have to see all of this area. After that make the calculation and check Bitcoin Mining is profitable or not for you?

You will mind many mining profit calculator online. You can use this calculator to make your estimations and profit rates.


The profit from Bitcoin mining depends upon how much an individual is ready to take a risk and willing to spend. If you are a beginner in this field than don’t do mining. Also if you are backed up by good resources than you can start mining in a pooling method.

I would like to say don’t invest too much in the Initial stage. First, start mining the Bitcoin on a small platform. See if things are going well and you are confident in yourself to make money from this than invest as much as you want.

It also depends on the price chart of Bitcoin. If the price of Bitcoin increase than your mining profit will also increase. If you want to see the Bitcoin price history chart you can see here.

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Mahesh Chaube

Hey, This is Mahesh Chaube, computer Engineer by Education and Crypto Blogger by Profession From Mumbai. Here at coinraja i write about money making and Reviews on Cryptocurrency Related Thing. I hope you are enjoying My post. cheers !!

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