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ELI5 Bitcoin Mining – Explain Bitcoin Mining Like I’m Five

Mining Bitcoin is foreign to most people, but along with Bitcoin it’s an industry that’s been going for over ten years. And it’s an industry that’s growing at an unbelievable rate, too.

For most people, mining Bitcoin boils down to whether it’s profitable. That’s the main reason most people get into it, but what is Bitcoin Mining? It is a technical subject, but allow me to explain in the simplest of ways.

ELI5 Bitcoin Mining

Mining Bitcoin is basically computers with the Bitcoin protocol downloaded, all processing the mathematical puzzle the Bitcoin algorithm asks of them.

With the processing power, mining increases the security of Bitcoin’s network and fights fraud by calculating every transaction that is proposed by any user.

A person who contributes their processing power (a miner) to the Bitcoin network is rewarded with newly minted bitcoins, which also distributes the coins in a fair and decentralized way.

How Bitcoin Mining Works

Hash functions are the pulse of mining Bitcoin. A hash function is basically a complicated math formula that takes in an input and delivers a different output. It’s a one-way system, so no transaction (output) can ever go back. This makes Bitcoin immutable.

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Example of Mining Bitcoin

Let’s say Alice pays Bob 1 BTC. The Bitcoin network records that on the open ledger as "Alice -> 1 -> Bob".

But this could be changed from 1 to 2 BTC or however many, and there’d be no consequence. So there has to be a way for someone to check the transaction should be valid. That's where mining comes in.

When Alice sends Bob that 1 BTC, miners in the Bitcoin network will try to hash the transaction "Alice -> 1 -> Bob”.

To guarantee the transaction is legitimate, there will be a certain amount of zeros, depending on the hashrate. If it doesn’t meet the required amount of zeros, the miners will simply hash it again and again until it does.

If it never has the required amount of zeros, it will be a fraudulent transaction and rejected by the network.

Once a correct hash is found, however, the transaction and hash are stored on the Bitcoin ledger for everyone to see.

The miner who calculated the correct hash is rewarded with the Bitcoin block reward. This is paid out for every block that is added to the blockchain, and at the moment, it is 12.5 BTC for every block.

Related Reading: ELI5 Bitcoin - Explain Bitcoin Like I'm Five

Proof of Work

The mining system for Bitcoin is known as proof of work (PoW), which means agreement has been met by all miners (computers) for every transaction, and that any transaction added to the ledger has a proof of work that it’s valid.

The data on the ledger was expensive to produce and it satisfies all requirements of the network. Producing proof of work takes a lot of processes and has a low probability of success, so any miner contributing must continuously work if he/she is to earn the block reward.


Anyone who decides to mine can learn from many mining guides on the Internet, and getting into it gives you a chance of earning the block reward.

On top of that, you are also helping to secure the Bitcoin network: a decentralized network of trust. A network and hard money that cannot be manipulated, and one where to own any part of you know you have something that has proof of work.

Author: Hunter Johnson