The process of creating Bitcoin is different to how money is created. Money in the traditional sense is created by a central bank printing it according to the political objectives of the central bank and/or government. Bitcoin doesn’t have a central bank and is an entirely peer-to-peer network, so who does this and how is more created to meet demand?

Remember that the scarcity of Bitcoin is proportional to its value, so it cannot be simply printed willy-nilly.

Miners are people who use specific software and computers that create the Bitcoin

Mines of Bitcoin use software to solve cryptic (crypto) maths problems and are paid for this by the release of new bitcoin via an exchange. Bitcoin Miners earn money via transaction fees in Bitcoin.

This acts as an incentive for more people to mine. But the more people mining the Bitcoin the harder it becomes to solve the cryptic maths problems by design – ensuring scarcity and therefore intrinsic value in each coin.

In the early days these problems could be done on a simple computer, but as the problems became harder, more powerful systems were required and soon miners realized that graphics cards used for gaming were better suited to the task. Despite providing higher performance they have a much higher electrical demand (Top tip: no doubt areas will grow up where it is easier to mine bitcoin. Cold places to ensure servers don’t overheat with cheap electrical costs. If you find out where these are, I would invest in shares in the local electric company).

Soon enough specific hardware was designed just for mining, these used chips that where reprogrammed just for for the creation of bitcoin. Now we have ASIC (application-specific integrated circuit chips) which are even more precisely designed for mining and have a much increased efficiency.

To overcome the increased difficulty in mining which has come with demand, miners have clubbed together to solve problems while sharing the bounty between them according to the work carried out (this allows people to contribute who haven’t got access to the ultra hardware but you do need a very good graphics card). This is called Pool Mining. A way to get involved in pool-mining and get a share of the bounty is via:


“MinerGate is a mining pool created by a group of cryptocoin enthusiast – it is the first pool which provides service for merged mining. This means the while mining on our pool you can mine different coins simultaniously without decrease of hashrate for major coin.”

Be warned, you need a very good graphics card/gaming computer for this and keep it well ventilated. This will wear your graphics card out faster and wont work on a Apple Mac. Remember you will be contributing to the incredible crypto-currency world and you’ll be one of the earliest adopters. As time goes on as discussed above, it gets harder to mine bitcoin and requires more energy, please bare this in mind before embarking on any mining endeavour and always adhere to due diligence.

To get paid you will have to setup a wallet/Coinbase account. I’ve written how to go about this here.

Like mining gold (or any other precious commodity) the more you take out the deeper you have to mine to get more.

Bitcoin miners approve each transaction in the world randomly, this ensures the security and safety of the network.

This is done through applying multiple transactions into a block and then applying that to the global ledger in the Blockchain. This is done through Hashing the nodes together which is shrinking the transactions and encoding them by applying a mathematical formula. Basically mixing up all the transactions and then presenting them to the network. With each miner providing a random set of transactions to work on, the process is completely at random and no one person can manipulate the processes. For every hash established the miner receives 25 Bitcoins, and the word is spread throughout the blockchain that this has been done. ‘Hurrah!’

So that then is a brief summary of how Bitcoin mining works and how one could go about mining and creating bitcoin for themselves. At least now you have a picture of the broader technology of Bitcoin which will help you understand and prosper from this exciting new technology.

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