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What Is Bitcoin Mining?

Bitcoin mining is the process by which transactions are verified on the blockchain. It is also the way new bitcoins are entered into circulation. "Mining" is performed using hardware and software to generate a cryptographic number that matches criteria. The first miner to find the solution to the problem receives the bitcoin reward and the process begins again.

The bitcoin reward that miners receive is an incentive that motivates people to assist in the primary purpose of mining: to legitimize and monitor Bitcoin transactions, ensuring their validity. Before you invest the time and equipment, read this explainer to see whether mining is really for you.

KEY TAKEAWAYS

Bitcoin miners receive bitcoin as a reward for completing "blocks" of verified transactions, which are added to the blockchain.

Mining rewards are paid to the miner(s) who discovers a solution, and the probability that a participant will be the one to discover the solution is related to the portion of the network's total mining power.

You need either a graphics processing unit (GPU) or an application-specific integrated circuit (ASIC) in order to set up a mining rig.

Throughout, we use "Bitcoin" with a capital "B" when referring to the network or the cryptocurrency as a concept, and "bitcoin" with a small "b" when we're referring to a quantity of individual tokens.