This is probably the most asked question about Bitcoin.

Even though the word ‘mining’ evokes images of men and women clad in work-wear going deep into the ground to extract valuable minerals, that is nowhere near what it is in the digital world.

The only similarity between the two is the fact that there is a wealth that is created.

Digital mining happens when your computers hardware solves a complex algorithm called a block, when said block is solved then you are rewarded a certain amount of coins allocated to that block called a reward.

Anyway, to understand how it is carried out, you need to think of these two aspects of the fiat currency; the system that supports it and how new money is added to circulation.

The Dollar, Euro, pound, yen and all the other fiat currencies are supported by an elaborate global network of banks, servers, staff and other resources. This system is jointly owned by governments, cooperates and individual entrepreneurs.

Unfortunately, these entities will always make decisions that are beneficial to their causes without having to consult you as their customer. And this was the major motivation behind the creation of Bitcoin. A decentralized currency allows the market and owners of the coin to prosper without a major regulatory commission governing the success of Bitcoin and swaying the market in their favor.

Bitcoin also needs infrastructure

Do not be mistaken, Bitcoin too needs a widespread network of infrastructure made of people, hardware and software.

But, having government or commercial organizations provide and run such a system will go against the spirit of decentralization, which the currency is founded upon.

But how does Bitcoin get around this challenge?

It is simple; Satoshi Nakamoto, the founding architecture of the digital currency, figured it out that if individuals in their private capacities contributed their computer hardware and software, that would build a giant server.

True to this dream, the network formed by computers in homes and offices around the world are able to supports and solve mathematical problems related to millions of Bitcoin transactions happening every minute.

In fact, the Bitcoin network is now considered as one of the most powerful supercomputers on earth.

At this point, another question is bound to come up; what motivates people to have their computers run 24/7 to support transactions of Bitcoin users they do not even know?

Satoshi Nakamoto came up with a rewarding mechanism. Every miner who solves a mathematical problem within the system stands to get rewarded with entirely new Bitcoins.

That brings us to the second aspect of fiat money; how new currencies are added to the circulation. Usually, the government through the central bank decides when to print new money for distribution.

For digital currency, the rewarding of the miners is the only way new units are added to the circulation.

Therefore, mining achieves two things – reward those who contribute their resources and introduce new Bitcoins into circulation.

Bitcoin mining has undergone significant changes

The process of mining has gone through significant changes since the inception of the digital currency in 2008.

The first miners used processors to solve the mathematical problems and approve transactions. At this early stage, this was sufficient and equally rewarding to the miners.

However, with an increase in numbers of transaction and the solving of the mathematical problems becoming harder, the processor became costly to use.

And the next piece of hardware came into the picture.

Miners discovered that using video gaming graphic cards resulted in a better job. They were faster than the processors but were equally high energy consumers.

Later mining shifted to reprogrammed chips, which were even more efficient. However, they generated a lot of heat as well and gulped a lot of power.

Nevertheless, that was the beginning of the Bitcoin mining solutions industry.

Currently, miners use ASIC Application Specific Integrated Circuit Chips. These use less power, are more productive and faster. There are also numerous brands of hardware and software mining solutions in the market.

However, even with this advancement, making money from mining has continued to become difficult, especially for an individual starting out. This is due to the larger amount of computing power mining Bitcoin the “difculty” to solve a block increases making it harder to solve the mathematical problem. The best bet you can have is to join a mining pool. Here miners pull their resources together and share rewards equitably.

Basically, mining is contributing resources to the Bitcoin network with the hope of being rewarded with new Bitcoins that automatically come into circulation.