The Technical Side of Bitcoin: How it actually works


It has been years since world’s first and mega cryptocurrency Bitcoin launched and even so, there’s no difference in the number of people investing in this currency each day. Presently, there are more than 565,406 destinations and 375,000 bitcoin transactions taking place per day. Moreover, there are 16,890,363 bitcoins already mined. This indicates that every day new addresses are generated and people are investing in bitcoins.


Want to invest in Bitcoin? Wait a moment and look at these things!

Are you interested in getting bitcoin? Well, before investing in any project, it is smart to first understand the mechanics and processes behind the project. Mining Bitcoin requires you to understand the hardware requirements needed for successful mining and the process of how to go about it.


So, here is a detailed description to understand the technical insights of Bitcoin!


How does bitcoin work?

First, bitcoin is a cryptocurrency, which is not generated by any central agency or authority. It is generated by miners through computer codes.  It is a digital currency secured with cryptography, which can be used for making digital payments, trading, and for online transactions just like our fiat currencies. Bitcoins are not physical coins, but virtual coins.

In layman terms, Bitcoin is a decentralized digital currency that holds a monetary value, generated by the code through electricity and high performance systems. These coins are generated through the process of mining and tracked from the blockchains.

Let’s have a look at the step-by-step process of mining and use of bitcoins:


  1. Mining – Creation of bitcoins

If you are curious about how Bitcoins are created, they are actually not created, but mined. Which means that they already exist somewhere, you just need to find them.

A person can create bitcoin by becoming a miner. You will need a high performance computer and mining software to create bitcoin. This software uses the system’s power to solve tough mathematical problems. When the miner solves the mathematical problem, he gets to create a block and as a reward, he gets some bitcoins.

In 2009 when bitcoin was launched, the reward for creating 1 block was 50 bitcoins. However, this reward value gets halved every 4 years.  There are even some dedicated circuits launched for mining bitcoins.

Mining is a very difficult task and after the hashing process, the bitcoin transactions are recorded in a blockchain. The miners keep contributing blocks to the network and are paid for this contribution. Mining bitcoin is an absolutely powerful method of making money from bitcoin, but it is also, a difficult process which requires a lot of computing power and high performance systems.


  1. Recording the mined blocks – Hashing and Blockchain

There is a network of miners who trade bitcoins. The miners use cryptographic data and processes to generate a hash function. This hash is the string, which is used to check the validity of a block. Nobody can change the details in the hash and thus, it is a reliable and secure function used for confirming the transactions.

Once all the transactions are confirmed, they are registered or recorded on the blockchain. A blockchain is a distributed and decentralized public ledger for recording bitcoin transactions.

The transactions are only recorded on a blockchain when the blocks are developed under the cryptographic rules and through hashing. Hash allows the current block to contain some details of the previous block for validation purposes. Through this, the coins are created and the transactions are listed in the blockchain. The blockchain is a public ledger in which, all the basic information about different blocks and transactions is recorded. Anyone can download and view the basic information of transactions. Also, it is a decentralized platform as there is no central authority like banks controlling the bitcoins.


  1. Purchasing or using bitcoins

Undoubtedly, the miners get bitcoins as a reward for contributing to the bitcoin blockchain. It’s up to them to sell their mined bitcoins at the existing market price or hold the bitcoins in their wallets.

Most of the miners sell the bitcoins to gain profit, as it is a great way of generating an income. Other miners use bitcoin wallets to store their bitcoins.

The miner’s information gets registered in the blockchain and if he chooses to sell or trade his bitcoins, the blockchain will reflect the transaction details. Every miner needs to get a wallet as the bitcoins are credited in the wallets as a reward of mining.

If you think that mining is a hectic process and you don’t have high-performance systems for the venture, you can earn bitcoins in different ways. You can accept bitcoin as payments, earn by trading, lend your bitcoin on interest etc. There are different ways people can get bitcoins and use them for making online payments and much more.

The blockchain wallets are safe and highly protected because private keys is used to sign the transactions. The wallet owner needs to sign the transactions to confirm that the transaction is done by him. This acts as a mathematic proof of transaction done by correct person.

This signature also protects the transactions from alterations. For making transactions, the sender needs to know the receiver’s address. Thus, for receiving money, you don’t need any information, while sending bitcoins, you will have to sign in using username and password and confirm your details.



Bitcoins are transforming the way we get and store our valuable assets. You can mine the bitcoins if you have highly accomplished systems or can get them from different exchanges as payment. You can also use cloud mining websites to mine Bitcoin and other altcoins.

Unfortunately, very few people have been able to take advantage of cryptocurrencies. A lot of people are still insecure about it and are not convinced enough that it may one day replace the traditional fiat currency


We hope this article helped you understand the technical backdrop of bitcoin creation and usage. For more articles on cryptocurrency, visit our homepage!



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