ForecastingStocks

Mining is the process that secures Bitcoin and brings new coins into existence under Proof of Work. It is worth understanding mechanically, because a lot of confusion comes from the word "mining" sounding like digging.

What miners actually do

Miners gather pending transactions into a candidate block and then repeatedly run them, plus a changing number, through the SHA-256 hash function, searching for a hash below a target value. There is no shortcut — they simply try enormous numbers of combinations per second. The first to find a valid hash broadcasts the block and collects the reward plus the transaction fees.

Difficulty adjustment

The network aims for one block roughly every ten minutes. As more computing power joins, blocks would come faster, so every 2,016 blocks (about two weeks) the network automatically adjusts the difficulty of the puzzle up or down to keep the ten-minute average steady. This self-correcting mechanism is elegant and important.

Hash rate

The total computing power devoted to mining is the hash rate. A higher hash rate generally means a more secure network, because an attacker would need to match a larger share of it. We return to hash rate as an analytical signal in the on-chain chapter.

The economics and the criticism

Mining consumes significant electricity, which is the main environmental criticism of Bitcoin. Defenders argue miners are incentivised to seek the cheapest power, often stranded or renewable energy. Both points are real; this course presents them so you can weigh them yourself rather than taking a side.