Bitcoin mining utilizes the Proof of Work (PoW) mechanism. The process consists of the following steps :

1. Transaction Pool
When a Bitcoin user sends or receives BTC, the transaction is verified by nodes on the network and put into a memory pool (mempool). The mempool is a temporary place for unconfirmed transactions. Miners will select transactions from the mempool to put into blocks, usually based on the transaction fees. Transactions with higher fees tend to be prioritized as they provide additional benefits to miners.

2. Cryptographic Puzzle Solving
This is the essence of Bitcoin mining. Miners race to find a hash value that matches the network's difficulty target using the SHA-256 algorithm. A hash is a unique representation of data in the form of an alphanumeric string. Miners try various random values (nonce) until they find a hash that meets the target difficulty requirement. The more miners on the network, the higher this difficulty. The network difficulty is adjusted every 2016 block, or about every two weeks, to keep the block creation time around 10 minutes. This process requires a great deal of computing power, which means high energy consumption. Therefore, specialized hardware such as ASICs are often used to improve efficiency.

3. Block Validation
Once a miner has successfully found a suitable hash, the block will be sent to the network for verification. Other nodes in the network will check if the block meets the following criteria :

• The block hash matches the difficulty target.
• All transactions within the block are valid, including ensuring there is no double-spending.
• The block is connected to the previous block via hash, maintaining the continuity of the blockchain.

If all validations are met, the block is added to the blockchain, updating the digital ledger that the entire network uses.

4. Rewarding
Miners who successfully add a new block to the blockchain receive a block reward, which consists of :

• New Bitcoins: A number of Bitcoins generated by the protocol. This amount decreases every four years through a mechanism called halving. Currently, the block reward is 6.25 BTC, and will decrease to 3.125 BTC after the next halving in 2024.
• Transaction Fees: Miners also receive all transaction fees contained in the block.

This reward is the main incentive for miners to support the network. When all Bitcoins have been mined (maximum 21 million), the incentive will come entirely from transaction fees.