bitcoin mining miner schürfen
Share on facebook
Share on twitter
Share on linkedin

Bitcoin Mining

The process of creating new bitcoins is referred to as “mining” (to mine). The term is purposely chosen on the basis of gold mining. The more gold is mined, the less is still available in the ground. Similarly, the amount of bitcoins mined per unit of time (about 10 minutes) is also gradually decreasing.

This process is defined by the algorithm of Bitcoin, the Blockchain. By the year 2140, all 21 million bitcoins will be mined. This is what the Bitcoin algorithm looks like. The term “miner” may have different meanings. For one, it refers to the person or organization that mines new bitcoins. On the other hand, “miner” also stands for the individual computer that specializes in executing the algorithm.

High Computing Power Means High Energy Consumption

The process of Bitcoin mining consumes vast amounts of electrical energy due to the computing power of the mining hardware. The more miners mine bitcoins, the higher this demand is overall. The part of mining that primarily causes this high energy consumption is to find and create hashes. The power, of course, costs money and is therefore dependent on the value of Bitcoin and how often a miner creates a block and thus is rewarded with new bitcoins.

A hash is a code, an individual sequence of letters and numbers that uniquely encrypts any file. You enter the file in the hash program, which then produces a hash. The program always generates the same hash from the same file.

Cryptographic Fingerprint

If only a single character is changed in the file, the hash value changes completely. The hash is, so to speak, the fingerprint of the file. It is also important to note that the hash cannot be used to deduce the contents of the file. What this hash is important for, what conditions it must meet, and what role it plays in mining is explained below.

The Process of Bitcoin Mining in Particular Fulfils Three Tasks:

  • It confirms the correctness of bitcoin transactions and carries them out
  • It guarantees the forgery-proof Bitcoin
  • It brings new bitcoins in circulation

The Work of the Miners Involves Several Phases:

Phase 1: Transactions are Registered and Verified 

If a bitcoin transaction, for example the payment for a product on the Internet, should take place, it will appear with sender and recipient address as well as the amount to be transferred in the Bitcoin network. Thus, transactions are always open and new ones are added. Nodes select a specific number of bitcoin transactions that are to be carried out worldwide and check each one individually. For this purpose, the nodes compare them with the Blockchain. They use the transaction histories of the respective addresses to check whether a new transaction is valid.

They ask themselves the following questions:

  • Does the buyer have enough bitcoins for the transaction?
  • Is he the owner of the bitcoins to be transferred?
  • Will the owner of the bitcoins try to send the same bitcoins twice?

After the test, the miners summarise all valid transactions in a list, the so-called block.

Phase 2: A New Block of Transactions is Prepared

The miners now add to this block the hash of the previous block, the last valid block attached to the blockchain. In addition to the hash – the individual sequence of letters and numbers that uniquely encodes any file, in this case the block in question – the miners add a “nonce” to the block.

A nonce is basically another combination of numbers and letters. The difference to the hash is that a nonce is chosen at short notice and with the intention of being soon replaced by a new, slightly modified code.

Phase 3: The New Block is Verified – The Actual Mining Begins

In the next step, the miners now generate a hash for the block they have just put together. Usually a hash is very fast to generate (in fractions of a second). For Bitcoin, however, it was determined that only every ten minutes, a new block should be created. Therefore, criteria have been set that a valid hash must meet.

Thus, it is not enough to find any hash. A valid hash of the Bitcoin blockchain must always start with a certain number of zeroes. Thus, the miners have to constantly try new hashes for the block to find one that meets this condition. In order for the hash to change, the miners also have to change the block slightly each time, and for that they have built in the nonce.

Therefore, the nonce is changed every time before a hash is calculated and then rechecked again to see if it starts with the correct number of zeroes. Since the searched hash is rare, many hashes must be generated until a matching hash is found. This results in enormous computing power combined with the high energy requirements of Bitcoin mining.

Phase 4: The New Block is Valid – Transactions are Confirmed

If the miners have found a valid hash, they place the verified block and its hash in the network. All other miners now include it in their calculations. Only if all transactions in the block are correct it becomes a verified part of the blockchain, and further blocks can be appended.

For the fact that the miners have verified a new valid block, the miners get a reward of currently 12.5 bitcoins [as of January 2019]. In addition, there are usually transaction fees for the individual transactions in the block. About every four years, the bitcoin amount that is paid out for a mined block is halved.

Originally, the reward was 50 bitcoins. In November 2012, it halved to 25 bitcoins, again in July 2016 to 12.5 bitcoins. This is a model of the gold mining, which is also less and less available the more it is mined. The next halving to 6.25 bitcoins is expected in mid-2020.

Proof-of-Work Guarantees Counterfeit Security of Bitcoin

The process – from creating a new block with the hash of the previous block to calculating a new hash and verifying the block – is called a proof-of-work (PoW). The PoW ensures that it is very expensive to find a new block for the blockchain. The miners do not receive new bitcoins and the transaction fees until at least 100 additional blocks were appended to their recently created block. This is proof that all transactions in this block are valid. If only one transaction is invalid, the other miners will notice and stop working with this block. Such a block is called an “orphan block” or “stale block”.

It is this computational rule of the system that makes Bitcoin tamper-proof, because for a block containing wrong transactions, the miners do not get any bitcoins. Their complete computing power for calculating the hash would have been in vain. The hashes calculated in the worldwide Bitcoin network are reported in the unit tera hash per second (TH/s). A tera hash equals 1012 hashes. This gives an idea of ​​the immense computing power that secures Bitcoin.

Read about…


Antonopoulos, A. M. (2017). Mastering Bitcoin: Programming the Open Blockchain (2nd ed.). Sebastopol: O’Reilly Media.

Bitcoin MiningTM®. (2018). Bitcoin Mining. Retrieved January 21, 2019, from

Bitcoin Wiki. (2019). Bitcoin. Retrieved January 17, 2019, from

Narayanan, A., Bonneau, J., Felten, E., Miller, A., & Goldfeder, S. (2016). Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction. Princeton, New Jersey: Princeton University Press.

Northern Bitcoin AG. (2018). Half-Year-Report. Frankfurt am Main. Retrieved from