How Does Crypto Mining Work? - Bitcoin Mining 101

How Does Crypto Mining Work? - Bitcoin Mining 101

How Does Crypto Mining Work? - Bitcoin Mining 101

How Does Crypto Mining Work? - Bitcoin Mining 101

The most commonly referenced value proposition for Bitcoin is the inherent built in supply cap of 21 million Bitcoin. It is a mathematical certainty that some time in the year 2140, the last Bitcoin will be mined. At the time of this writing,  18.6 million, or 88.77% of those, have already been mined.

Bitcoin's utility extends beyond just being a novelty such as a Charizard Pokemon card. There are investors and entrepreneurs who strongly believe that the network effect of Bitcoin. The implications of the underlying technology have already begun to bare fruit. Movements such as the effort to promote decentralized finance would not have been possible had it not been for the Bitcoin protocol.

Thus we are left with the question we hope to answer. What is Bitcoin mining and how does it work?

Bitcoin Mining 101

Bitcoin mining is the process by which computers validate the blockchain network by solving complex mathematical algorithms. Once a Bitcoin miner successfully validates a block, they are rewarded in Bitcoin, also known as the "Block Reward".

The Bitcoin protocol is built into the token’s underlying blockchain technology. As the name suggests, blockchain technology is literally an ongoing chain composed of blocks of information. In this case, the information blocks are transactions on the network.

When users initiate transactions of BTC, the information is stored on a separate block. This block must be verified using computing power. Essentially, the computer runs a program to guess a series of numbers and letters that unlock the next block and corresponds to the numbers and letters of the previous block. These sequences of numbers and letters are called “hash.” Guessing the right hash is like trying several different keys to mate with an unfamiliar lock. The underlying mathematics and technical specifications of how a Bitcoin transaction is validated on the network is quite remarkable.

Once the computer finds the right hash, the block is verified and added to the ongoing chain. The computer that successfully verified it is rewarded with freshly minted BTC. This is the mining process.

Currently, roughly 900 new BTC are created through this process. However, there is one other aspect baked into the network to ensure its stability: competition.

Bitcoin Network Difficulty

To ensure stability and security, the Bitcoin blockchain has special controls built-in. These controls adjust the difficulty of guessing the right hash according to the number and collective power of computers trying to guess it simultaneously.

The complexity of the hash adjusts higher alongside the amount of computational power used. In other words, generating BTC becomes more difficult when more people are trying to generate it.

This ensures that the supply of BTC is consistent. At the time of this writing, the bitcoin block reward is 6.25 BTC per block. Then protocol also maintains a 10-minute time gap between two consecutive blocks. If blocks are being mined too quickly (under 10 minutes) the difficulty is adjusted higher to make the next block harder to verify. This ensures that the network is secure and cannot be controlled or attacked by any entity with brute force and higher computational power.


As Bitcoin continues to mature and be adopted, it's value will continue rise on the value of its network effects alone. As a result, more Bitcoin mining operations will continue to go online to participate and support the network in hopes of collecting a block reward. Network difficulty will continue to accelerate over time as a result.

Bitcoin Mining Innovation & Immersion Cooling

Publicly-listed Bitcoin miners in North America such as Argo Blockchain, Marathon Digital Holdings, and Riot Blockchain have access to capital to power vast mining farms and expand computational power alongside Bitcoin’s network difficulty. The North American Bitcoin mining industry is maturing at an astonishing rate and with it we are seeing incredible innovation take place in the use of sustainable energy to fuel the Bitcoin blockchain network.

Argo Blockchain and Riot Blockchain were the first to announce dedicated investments in building out new facilities utilizing immersion cooling technology. The Helios facility in West Texas, will make Argo Blockchain the first and largest North American Bitcoin mining facility built from the ground up to support immersion cooling technology and draw its power from sustainable energy sources. The facility is slated to be completed Q2 2022.

About Authors:
Laura works on the communications team at Argo and is one of their early hires. She is passionate about the potential and future applications for Bitcoin and Blockchain Technology. Michael is a market research analyst who's been working on Bitcoin and Blockchain research since 2018. He currently works for a bitcoin & crypto marketing agency and is a regular guest contributor.