With all the talk about proof-of-stake these days, it's worthwhile to refocus on what makes Bitcoin unique and successful: proof-of-work (PoW).
Beginner-friendly, in-depth, with diagrams and illustrations included!
TL;DR
Proof-of-work (PoW) is just what it sounds like: proof that work has been done. "Work" refers to spent energy. PoW is self-evident and you see it every day: a hot coffee is proof-of-heating and footprints in the snow are proof-of-walking.
Adam Back's Hashcash from 1997 was the first major implementation of PoW in a distributed network, which used it to combat email spam. Satoshi Nakamoto's Bitcoin from 2008 requires miners to present PoW to the network before their mined blocks can be added to the blockchain. Both systems utilize a specific type of work called hashing, which involves randomly guessing inputs until an acceptable output is found. Hashes are costly to produce but easy to verify, making them an ideal form of PoW for bitcoin.
Nakamoto realized proof-of-work is the key to solving a longstanding paradox in distributed data systems, known as The Byzantine Generals' Problem. Each computer (node) must find a provably difficult target hash, recalibrated every two weeks to ensure blocks are generated every ten minutes on average. Nodes always choose the longest chain––a rule known now as Nakamoto Consensus, which ensures consensus with sufficient time passed and work done.
The bitcoin mining process consists of five steps:
A miner sets up a mining node and a mining ASIC
User transactions are broadcast from wallets to nodes' mempools
The miner constructs a candidate block and begins hashing for a target by altering a nonce within the block
Meanwhile, the miner adds transactions to the block from the mempool, often optimizing for transactions that pay the highest fee
The miner finds a valid PoW and submits their block full of transactions to the Bitcoin network to be confirmed, receiving the block reward and fees in return!
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TL;DR