Bitcoin mining for Dummies
Introduction
Bitcoin mining is the process of validating transactions and adding new blocks to the Bitcoin blockchain using computational power. Here’s a breakdown of the key aspects of Bitcoin mining:
Purpose and Function
Bitcoin mining serves two crucial functions:
It secures the network by making it prohibitively expensive to attack.
It introduces new bitcoins into circulation at a controlled rate.
How Mining Works
Miners use specialized hardware and software to solve complex mathematical puzzles.
The first miner to find the solution to the puzzle receives the right to add the next block to the blockchain.
This process involves generating a cryptographic hash that is equal to or less than a number set by the Bitcoin network’s difficulty algorithm.
Rewards
Miners who successfully add a block to the blockchain receive two types of rewards:
Newly minted bitcoins (block reward)
Transaction fees from the transactions included in the block
As of 2025, the block reward is 3.125 bitcoins per block, following the most recent halving event in April 2024.
Energy Consumption and Environmental Impact
Bitcoin mining is an energy-intensive process:
It consumes a significant amount of electricity, estimated at 0.69% of global electricity use.
The carbon footprint is substantial, with estimates suggesting Bitcoin mining emitted over 85.89 Mt of CO2 during the 2020-2021 period.
Water consumption is also a concern, with some estimates suggesting one Bitcoin transaction consumes about 2,237 gallons of water.
Mining Equipment
Mining has evolved from using standard computers to specialized hardware:
Miners now use Application-Specific Integrated Circuits (ASICs) designed specifically for Bitcoin mining.
These machines can generate over one quintillion random codes per second.
Mining Pools
Due to the increasing difficulty of mining, individual miners often join mining pools:
Mining pools combine their computational power to increase the chances of solving a block.
Rewards are then distributed among pool members based on their contributed computing power.
Conclusion
Bitcoin mining plays a critical role in maintaining the security and functionality of the Bitcoin network, but it also faces challenges related to energy consumption and environmental impact.
