Bitcoin mining is the processing of transactions in the digital currency system, in which the records of current Bitcoin transactions, known as a blocks, are added to the record of past transactions, known as the block chain.
A Bitcoin is defined by the digitally signed record of its transactions, starting with its creation. The block is an encrypted hash proof of work, created in a compute-intensive process. Miners use software that accesses their processing capacity to solve transaction-related algorithms . In return, they are awarded a certain number of Bitcoins per block. The block chain prevents attempts to spend a Bitcoin more than once -- otherwise the digital currency could be counterfeited by copy and paste.
Originally, Bitcoin mining was conducted on the CPUs of individual computers, with more cores and greater speed resulting in more profitability. After that, the system became dominated by multi-graphics card systems, then field-programmable gate arrays (FPGAs) and finally application-specific integrated circuits (ASICs), in the attempt to find more hashes with less electrical power usage.
Due to this constant escalation, it has become hard for prospective new miners to start. This adjustable difficulty is an intentional mechanism created to prevent inflation. To get around that problem, individuals often work in mining pools.
Bitcoin generally started with individuals and small organizations mining. At that time, start-up could be enabled by a single high-end gaming system. Now, however, larger mining organizations might spend tens of thousands on one high-performance, specialized computer.
In the malware world, one of the more prevalent current threats is mining botnet infections, in which user systems mine for Bitcoin without the owners' knowledge and funds are channeled to the botnet master.
See a video explanation of Bitcoin mining: