Miners group transactions into blocks and
verify them. Each time a new block is found,
the process repeats and miners compete with each other to find the next block.
For each new block, the miner receives a reward
in the form of newly issued coins as well as transaction fees from the entire block.
Mining bitcoin is energy intensive and requires access to the right equipment and a cheap energy source to be profitable.
What is bitcoin mining?
Bitcoin mining is a way of confirming transactions and at the same time releasing new bitcoins into circulation. Users pay a fee for each transaction which are then processed in blocks. Once a block is assembled, all miners compete among themselves to see who can mine that block first and get rewarded with newly minted bitcoins and transaction fees. This is a mathematical function that is difficult to solve but easily verifiable by the rest of the network. Blocks are mined on average every 10 minutes and the current reward per block is 6.25 BTC.
The whole principle around bitcoin is based on game theory and incentives. For example, by self-regulating the difficulty of mining, bitcoins are constantly released into circulation according to a predetermined schedule. This predictable and fixed supply is one of the unique features of bitcoin.
The overall processing power of the bitcoin network is so large that it is mostly mined through mining pools, where miners share their processing power, giving everyone in the pool a better chance of mining a block. Pool then split the reward to miners according to performance.
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