How Does Bitcoin Mining Work?

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The limit of the number of bitcoins allowed to exist in the market is 21 million. Introduced in 2009 by a mysterious source, Bitcoin is an accessible cryptocurrency. All you need to buy and sell bitcoin is a smartphone or computer and a connection to the internet. However, before investing a large amount of money in Bitcoin, research the different terms used and how the currency system works. If you’ve been researching, you may still wonder, “How does Bitcoin mining work?”

We’ll answer this question and more below. After that, it’s time to become a master-level Bitcoin investor.

What Is Bitcoin?

Bitcoin isn’t a tangible form of currency. You cannot take a handful of bitcoins to the local grocery store. Instead, it’s a form of currency that exists online. BTC is a type of cryptocurrency with no central banking system or institution. Those involved in transactions are independently buying and selling. Every transaction exists on an accessible public ledger, but the transaction is untraceable to your identity.

Bitcoin exists on a blockchain. These blocks contain information about transactions, and all entries are pieced together in chronological order. People can add new transactions to the blockchain by mining. This job isn’t for the faint of heart (or those who have yet to have an adequate amount of coffee for the day). Mining is a lot of work.

And before you ask, “Is Bitcoin legal in the US?” Yes, yes, it is.

Let's Get Into The Details

There’s a lot to talk about when it comes to Bitcoin mining. So take a deep breath, and let’s begin. 

Mining is necessary for adding new bitcoins into circulation. Only 21 million bitcoins exist, and these 21 million bitcoins are the only ones ever able to exist. Besides discovering new bitcoins, mining is also vital for maintaining the ledger. As of today, over 2 million bitcoins are still available to mine. The search continues. To mine for bitcoins, you’ll need some high-tech computer software and a lot of time. The appeal to mining is earning cryptocurrency without investing any money or selling Bitcoin. Instead, miners reap the rewards for the work done. Sometimes.

What Kind Of Work Does A Bitcoin Miner Do?

In simple terms, Bitcoin mining consists of individuals performing audits on transactions. They’re keeping Bitcoin honest and verifying the authenticity of each transaction. This verification process is crucial because it cuts down on the issue of double-spending


Miners become eligible for a reward after verifying 1 megabyte worth of data. Depending on how much data each transaction uses, 1 MB could be ten transactions or a few thousand. Once you meet your 1 MB requirement, you must also be the first miner to arrive at a correct answer to a numerical problem. A large load of computer power is needed to be the first miner to solve a problem, and the work is essentially guesswork. Because mining is guesswork and requires so much computer power, not all miners are rewarded well for their efforts. Plus, miners’ rewards are halved every four years. 

A Clarity Checkpoint

We know this is a lot of dense information, so let’s take a moment to break it down. Then, we’ll explain it as best as we can. 

Imagine you had a big jar filled with yummy jellybeans. Then, to make your day more exciting, you ask three friends to guess how many jellybeans are in the jar. Of course, you’ll want to ensure you wrote down the specific number before they start guessing. Your friends must guess the correct answer or a number less than the correct answer to be right. 

Let’s say there are 500 jellybeans in the jar, and your first friend estimates there are 650 jellybeans. Sound the buzzer because he’s eliminated from this game! Moving onto Friend 2 and Friend 3, number 2 guesses 410 jellybeans while number 3 guesses 370 jellybeans. Neither hit the exact mark, but they guessed numbers lower than 500. They both get a gold star. 

Now, imagine a game like that, except over 1 million friends are trying to guess the number of jellybeans. And the number of jellybeans comes out to be a 64-digit number. So that’s going to be tough. As a miner, you want to be one of those millions of friends that guesses the exact number or below. So if multiple miners are eligible for gold stars, the network will typically reward the miner who’s verified the most transactions.

jar of jelly beans, how does bitcoin mining work

What You Need To Know About Mining Hardware

If you’re going to be a miner, you need the right equipment. Proper mining hardware consists of computers specifically created to mine bitcoins. Therefore, it would be best to have reliable, powerful, and efficient hardware.


Your hardware setup depends on how much space you have and how much you’re willing to invest. Some individuals have single hardware units and work out of their bedrooms. Other people have spent thousands on building large units in warehouses. 

As you select hardware, there are a few key characteristics you want to look at. 

Check out the hardware’s ambient temperature, electricity consumption, and hashing power. Hashing power is how much power your hardware uses to find and solve hashing algorithms. The algorithms create room for new transactions and generate new cryptocurrencies. 

Think About Where You Live

To fully experience the benefits of mining, what you make from mining must be more than the cost of the energy you use. (PS- It takes a whole lot of electricity.)Check out the cost of electricity in your area. Then, figure out how much you would use to run your mining hardware. Next, consider how many hours this hardware will be up and running. 

Efficiency is essential when selecting hardware because more efficient hardware uses less electricity than other less efficient options. The less electricity you use, and the less it costs to use, the higher the value of Bitcoin. Because it uses so much electricity, many people worry about sustainability and its environmental effects. So it’s something to keep an eye out for as we move forward with this currency. 


Things To Keep In Mind A You Begin Mining

Take a second to pause before diving headfirst into the mining pool. Keep a few things in mind as you get started. 

You may have to pay selling fees if you want to sell the bitcoins you mined. Lesser-known miners typically sell through a retail exchange site, and these sites often require payment. Professional miners, on the contrary, might have people buying their bitcoins at a higher price than the coin’s original set price. It can pay to be a professional. Speaking of professional miners, they have access to the best mining hardware. But, on the other hand, amateur miners usually cannot afford the hefty price tags on top-level hardware.

Are There More Reliable Ways To Reap The Benefits Of Bitcoin?

Not everyone is attracted to the idea of mining. It’s understandable. Learning to buy and sell is a more reliable way to reap the benefits of Bitcoin. While the rewards of mining may be more significant, the rewards of investing are much more reliable.

Take a few courses or watch a few videos on how to buy and sell Bitcoin. It’s an investment of calculated risks, so approach it with strategy and hope. Many solo entrepreneurs are even starting businesses with the sole mission of teaching people how to invest in Bitcoin. Seek out these sorts of companies if you’re serious about long-term investments.


Luckily, more companies are starting to accept Bitcoin, including Visa. This widespread adoption makes this currency worthy of investment to many people.


There’s a thrill involved with investing in Bitcoin. However, do not put all of your eggs in the same basket. Instead, diversify your investment portfolio with other cryptocurrencies, such as Marscoin.


Diversification is vital when investing because cryptocurrency markets are volatile. If you invest all of your money in Bitcoin and the value crashes, you’re out of luck. 

Invest a little bit here and a little bit over there. That way, if one of your investments drops in value, you might still have another one doing well. 

byte federal how does bitcoin mining work?

How Does Bitcoin Mining Work? You Asked, We Answered!

With Bitcoin consistently stealing headlines, you probably ask, “How does Bitcoin mining work?” A lot goes into the subject of mining, but you’ll find your answers in the article above. 


First, make certain that you understand the energy that goes into mining before you begin mining for BTC. Check out your local electricity prices, and find efficient mining hardware to make your experience more profitable. If mining doesn’t tickle your fancy, stick to buying and selling Bitcoin. 


Speaking of Buying and Selling BTC, Byte Federal Bitcoin ATMs make that process safe, simple, and secure. Our BATMs have the highest daily limits, low fees, and quick transaction times, and all you need to get started is your smartphone, ID, and cash.  

Are you ready to diversify your portfolio? Choose from 25+ different crypto coins at a nearby Bitcoin ATM. Use our site to track down the nearest Bitcoin ATM. 

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Jennifer Lawrence, the effervescent Creative Director of New Bytes, brings a fresh and innovative perspective to the crypto-focused publication. Hailing from the vibrant city of Austin, Texas, Jenny's intrigue in the intersection of design, technology, and finance was sparked during her time studying at the Rhode Island School of Design (RISD).

Jenny's commitment to clarity through design, her comprehensive understanding of the crypto universe, and her passion for making information aesthetically accessible contribute immensely to Cryptosphere's appeal and its engagement with a broad audience.