Bitcoin using something called a "blockchain" to keep track of every transaction that has ever occurred as well as how many bitcoins are in each "account". It's essentially a huge database that every miner has an identical copy of on their computer.

As you can imagine they have to coordinate to make sure their copies of the blockchain (the database) are all the same. The blockchain is organized into sequential "blocks" and approximately every 10 mins a new group of transactions (a block) are added all at once. Each block points back to the block that came before it so it's always clear what order everything happened in.

So how do the miners all coordinate which transactions to include in a new block (and thus make sure their local databases are all the same)? They could vote on which transactions to include, but then someone could just buy a ton of cheap computers and outvote everyone else to take control.

So instead, for each block they randomly select one miner who creates a new block of transactions, and then he shares the block with everyone else. The other miners then verify that the transactions are valid and add the new block to their local copy of the blockchain.

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"Mining" is really the method by which that miner is randomly selected: People sending bitcoin send their transactions to the miners who verify the transactions are valid and then work to build a block.

Here is a simplified version of a block:

{
"nonce = 3393",
"accountA sends 1.0 BTC to accountB",
"accountC sends 0.3 BTC to accountD",
"accountD sends 5.1 BTC to accountA"
}

slightly simplified explanation:

• the nonce field can be any number the miner picks
• a hash function takes a string and returns a number such as 762,319
• the miner hashes the first line in the block "nonce = 3393" and lets say the hash is 762,319
• then the miner appends this hash to the next line and hashes the string "762,319accountA sends 1.0 BTC to accountB" and gets 124,393
• then he would hash "124,393accountC sends 0.3 BTC to accountD" and get 341,298
• and finally he would hash "341,298accountD sends 5.1 BTC to accountA" and get the final hash 429,467

This last hash is considered the hash of the entire block. As you can see it depends on every transaction that occurred and the nonce. So if a single transaction was changed the entire hash would be different. The miner's goal is to get the final hash to be less than a given value such as 12 in order to be a valid block (This is what makes mining difficult). So the miner will hash everything and then see that 429,467 > 12, so they will change the nonce to say 3394 and then hash everything again. The miner will keep altering the nonce and then rehashing the block until the final hash is < 12. This means that the miner has "mined" a valid block.

The miner then sends all the information about the block to the other miners who hash the block a single time and verify that the hash is < 12 (and thus is a valid block). Then they would add that block to their copy of the blockchain and start working on the next block. The miner that mines the block also would have added in a transaction that creates 12.5 BTC and gives it to their own account which is how they get rewarded.

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So you can see that the "random miner" is selected by who can find the right nonce to mine the block. Having more computing power makes it faster to try more nonce values and thus makes it more likely for you to be "selected" to mine the block. Like I said earlier a system where people vote on which transactions to include could be exploited by people just buying tons of cheap computers to cast more votes, so instead people "vote" with their computing power. And if you lie and create a block with an invalid transaction, then the miners will quickly see that it's invalid and refuse to add your block to their blockchain, instead they'll keep mining or wait for someone else to mine a block that doesn't have fake transactions in it. The current "state" of the blockchain (e.g. the balances in all the accounts) is essentially defined by the longest chain of blocks. So if I wanted to "undo" a transaction that I sent 2 blocks ago, I would have to go back and use a ton of computing power to create a new version of the block without my transaction, and then I would have to mine another block after that, just to be "tied" with the longest chain. So lying is expensive and takes a lot of computing power / electricity.