Bitcoin mining works by verifying and adding transaction data to the Bitcoin blockchain through a process that involves solving a complex computational puzzle called Proof of Work (PoW). Miners collect pending transactions from the memory pool (mempool), bundle them into a new block, and then repeatedly try to find a special number called a "nonce" which, when combined with the block's data and hashed using the SHA-256 algorithm, produces a hash value below a certain difficulty target set by the Bitcoin network. This process requires powerful specialized hardware and considerable electricity because miners must try many nonce values to find the right hash. Once the correct nonce is found, the block is broadcasted to the network, validated by other nodes, and added to the blockchain. The successful miner is rewarded with newly created bitcoins (block reward) and transaction fees. This mining process both secures the network and allows new bitcoins to enter circulation.
Key steps in Bitcoin mining:
- Miners verify pending transactions and organize them into a block.
- They calculate a Merkle root for the transactions and create a block header.
- Mining involves guessing nonce values to produce a hash under a difficulty target.
- The first miner to solve the puzzle shares the solution, which is verified by others.
- Once validated, the new block is added to the blockchain.
- The miner receives a reward in bitcoins and transaction fees.
- The cycle repeats continuously to secure and maintain the blockchain.
This competitive process ensures network security and the integrity of transactions while managing the creation of new bitcoins in a decentralized manner.
