Deep in the Bitcoin Mine – Bitcoin Mining For Beginners – Part 1

, ,
Bitcoin Mining Deep Dive

We’re going to take a few posts to really “dig deep” into Bitcoin mining (with plenty of mining puns to boot). Now that we’ve looked at the cryptographic aspects, we’ll focus on the nuts and bolts of mining including hardware you need to get started, how to join a mining pool, and balancing the economics of whether or not it’s worth it to mine for yourself or get into cloud mining. There’s a lot going on here if you haven’t noticed! Therefore, Let’s dive into Bitcoin Mining for beginners part 1.

Bitcoin Mining For Beginners

Before looking into the computer power necessities to mine, we need to remember the key elements of what’s actually going on during a mining operation. We need a computer of some sort that is able to compute a hash based on specific information within a block of transactions in the Bitcoin network. The hashing algorithm used for Bitcoin is the Secure Hash Algorithm (SHA-2 or the 2nd generation of SHA) with a 256-bit output length (usually referred to as “SHA-256”).

It’s not really necessary to know all the details of how we arrive at this output for our purposes, but the computing power to transform a small block of information into an output message of this size is rather trivial. Here’s a simple picture below (taken from BitcoinWiki).

Figure 1: A simple example of computing a SHA-256 hash

Basically, a message is split up, run through a specific crypto algorithm many times, and output as a 256-bit value. No problem, what about if we tried this 10 times in a second? That would be a lot of calculations, but still this is computationally negligible given the current state of CPU power. What about 100? 1,000? Now let’s try 1,000,000.

Million Hashes Per Second

Even at a million hashes per second (that’s a lot of computing, needless to say), we aren’t even scratching the surface of what a Bitcoin mining device is capable of. As of the time of this writing, you can purchase your own Bitcoin miner that can produce 13.5 TH/s (terahashes per second) for $90. This means that this mining rig (which is relatively cheap, by the way) can produce 13,500,000,000,000 hashes per second. Some of the bigger rigs can produce 67 TH/s…it is difficult to even conceive how this could produce so many calculations on a per second basis.

How is this possible?

Bitcoin Mining Nodes

Enter our time machine as we travel back to the not-so-distant year of 2009 when it all began. In this quaint age, any node on the Bitcoin network who wanted to mine was able to use a simple PC. When Bitcoin first started, the reward for finding the hash of a specific block was 50 BTC – which is a ton of money at the present moment but was worth very little when the cryptocurrency first began. At this time, it took machines guessing around 10 MH/s (megahashes per second) statistically to find a hash below the target number for the network.

It was simple enough for a computer’s CPU to compute this number of hashes in hopes of being the lucky miner to solve the block and reap the mining reward. (Check the Bitcoin Difficulty Chart to see how many mining operations are running to compare how many you need to solve for a new block currently.)

Bitcoin Network Self Regulation

Well, needless to say, people weren’t content with running CPU’s to compute hashes and now rely on more powerful means. As a quick aside, it’s important to remember what’s going on with mining power – as more people add more effective mining power (i.e. calculation operations) to the overall Bitcoin network, the difficulty of the target number simply goes up.

The network is self-regulating and desires to keep block outputs at around 6 per hour or every 10 minutes. So, if more power is added to the overall network, the difficulty increases. This happens regardless of the type of processor being run – it’s simply based on the overall computing power. We learned way more about this in our post on Bitcoin mining’s cryptographic operations but essentially the target number will add more 0’s to the beginning of it such that hashes need to be below an even smaller number, which increases the overall difficulty of attempting to find a hash with the SHA-256 algorithm.


Alright, after operators were no longer content with the power provided by CPU mining, the GPU miner became the new answer. GPU’s are dramatically quicker than CPU’s (as in 1,000’s of times quicker) because of the function they serve to provide. Think about it like this – CPU’s are kind of like a boss dealing out tasks. The CPU and its instruction set are designed to handle a host of tasks in a computer. Tasks such as graphics operations, math computations, isolations of threads among processes, handling virtual memory allocations, and more are done.

GPU’s don’t care about all of this – they just want to work. The job of a GPU is to do the same thing over and over and over. This supports graphic operations for a computer, so they are designed to perform calculations very quickly and very efficiently. In addition, they can handle more parallel operations. (similar to fitting all of LA’s traffic in a 20-lane highway vs. a 2-lane highway).

Bitcoin Mining Resources

Want to learn more about the topics we covered today? Here’s a few links for you to check out:

  1. Here’s some more information about the difference between CPU’s and GPU’s.
  2. This article gives a basic overview of mining. It also discusses many available facets for starting.
  3. Want to buy a dedicated Bitcoin miner? We didn’t get to a deep dive on these devices this week. That’s coming next week, but take a sneak peak at what’s on the market.
  4. Finally, the name’s in the title: “What is Bitcoin Mining and How Does it Work?

Next week, we’re going to tackle the two remaining mining hardware types – the FPGA and ASIC miner. We’ll also get to discuss what it looks like to mine for yourself, including some possible platforms to join. We’ve got a lot to get to – thanks for reading, and we hope to see you in the next post!

2 replies

    Trackbacks & Pingbacks

    1. […] back to our exploration into Bitcoin mining!  In the first part of this mini-series, we took a look at what mining is and how it originated.  Remember that the […]

    Comments are closed.