What is mining? – Mining overview Part 1

In this short series of posts, I will look into what is mining for crypto currencies. In the first part, I’ll focus on what is mining itself and in the other sections. I will look into how you might go around to start mining. These articles, are an introduction to the topic, rather than a complex technical description of how exactly mining works. Also do note that mining works slightly differently for various coins, but the underlying principle is similar. For simplicity, the main focus will be on bitcoin as it is the most popular crypto currency.

In order to start talking about how to mine, it is important to establish some ground knowledge. In order to do that, let’s define some starting terms that will let us elaborate further.


Blockchain is a list of transactions that has ever occurred in a particular cryptocurrency. Think of it as an endless book, or a database of lines of transactions. With this record history, it is possible to determine how many bitcoins were at any address at any given time. Blockchain does not permit any duplicate transactions to be sent. So no bitcoins can be sent to another address twice.


Since we now know what a blockchain is, let’s have a look at what it consists of. A blockchain consists of individual blocks. A block can be thought of as a page of the endless book that a blockchain is. Each block consists of individual transactions and a hash (a pointer) to the previous block. This way, each block can be traced to the original block – the genesis block.

So what is mining?

Now that the basic principles are established, let’s look at what mining actually is. Mining is a lottery and a set of complex math problems. Every 10 minutes (give or take) some pending transactions get taken and are converted into a complex math puzzle of trying to generate a number (nonce) that when hashed will match or be lower than the target hash – block difficulty. Whoever solves the puzzle first announces it to the network. Other miners then work to verify that the solution is correct. Once verified, the solution becomes a new block and whoever mined – solved/guessed – it receives a reward for solving it.

This is a very simplified version and there are many other aspects that come to play when solving the required hash, let’s look at them real quick so that we can proceed with how to mine bitcoin.


Difficulty is the number below which the target hash needs to be calculated. Difficulty adjusts over time in order to keep the time it takes to mine a block relatively consistent – 10 minutes.

Hash rate

Hash rate is perhaps the most important factor when mining for bitcoins and other crypto currencies that can be mined. It is a measurement of how many hashing functions can be performed per second – the more hash rate, the higher the chance of guessing the right number as you will have more chances before someone else finds it.


Since so many people are mining bitcoin and the luck based factor that is involved with mining, it is common to join a pool – a group of miners sharing all their collective hash rate in order to be the first ones. The reward for mining a block is then distributed along contributing members after some fee is deducted by the pool.


With all this ground work established, we can look into different ways of mining. You can either mine with your own hardware, or try out cloud mining.