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How does Bitcoin
mining work?

Because Bitcoin is not overseen or regulated by a central authority, Bitcoin miners confirm and verify transactions by solving complex mathematical crypto calculations that are eventually recorded in a block in the blockchain.

Miners receive the final batch of transaction data, which are then run through a cryptographic algorithm. In the process, a hash, a string of numbers and letters that does not reveal any transaction data, is generated and used to verify validity. The hash is designed to ensure that the corresponding block has not been tampered with. In case when even one number is off or out of place, the corresponding data generates a different hash. The hash of the previous block is integrated into the next block so that if anything has been changed in the previous block, the generated hash will change, too. The hash value must also be below the target value set by the hash algorithm. If the generated hash value is too large, it is generated again until it is below the specified target value.

The hash process is designed in a way that solving transaction-related algorithms becomes increasingly difficult over time. It means that solving these algorithms also requires more and more computing resources.

To reward Bitcoin miners, they are allocated a certain number of Bitcoins in return for their work. Bitcoin mining thus performs three tasks. It verifies Bitcoin transactions, creates a way to spend more money, and incentivizes more Bitcoin mining.

The computing power required for Bitcoin mining today means that access to powerful computers and large amounts of electricity is essential. At first, Bitcoin mining could be done by individuals on individual computers. However, as the difficulty level in solving transaction-based algorithms increases over time, it is improbable that individual computers will be able to mine Bitcoin. Instead, most Bitcoin miners use Application-Specific Integrated Circuits (ASICs) and other methods to mine Bitcoin.

The mining reward amount changes by half every four years.

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