Bitcoin mining is the process of adding new blocks of transactions to the blockchain and securing the network. It is called “mining” because miners also earn newly created coins as a reward, similar to mining gold.
Here is what miners actually do:
- Collect transactions
Miners gather valid transactions from the network and assemble them into a candidate block. - Do proof of work
To add their block, they must solve a cryptographic puzzle. This involves trying many different inputs until they find a hash that meets the current difficulty target. This work is done by specialized hardware called ASICs. - Broadcast the block
When a miner finds a valid block, they send it to the network. Other nodes verify the proof of work and the transactions. - Earn rewards
If the block is accepted into the chain, the miner receives:
- The block subsidy (new coins created by the protocol).
- The transaction fees paid by users.
- The block subsidy (new coins created by the protocol).
Why mining matters:
- Security
Proof of work makes it very expensive to rewrite history. An attacker would need huge amounts of energy and hardware to outcompete honest miners. - Decentralization
Many independent miners compete. No single party is supposed to control the network. - Ordering and finality
Miners decide the order of transactions in blocks, giving the system a clear timeline and eventual finality.
On scalable networks, mining also becomes a competitive data processing industry, not just a game of speculation. Miners are rewarded for providing real services to users.