To avoid the nitty-gritty technicals, let’s use an analogy. 

Suppose you enter yourself into a lottery.. But this is a special kind of lottery. We’ll call it a “Reverse Lottery".
In this lottery everybody knows the winning numbers. Sounds like an easy lottery to win, right? Not exactly.

You can’t simply “pick” your numbers when buying your ticket. You can only buy a ticket with numbers randomly generated on it. So, the only way for you to win the lottery is to keep buying ticket after ticket after ticket…. Until you buy one that matches the winning numbers you have.

This is precisely what is involved in the Proof Of Work cryptographic puzzle. People use their computers to randomly generate numbers at a rapid pace. (These people are called miners, btw.)  If they generate the “winning” number, they win the lottery.

Let’s say you know the winning ticket number of a Reverse Lottery to be:  1111111111.

Now it’d be nice if you could go up to the counter and ask for a ticket with those numbers. But you can’t. All you can do is pay for a ticket and hope it generates: 1111111111. If not – tough luck. Buy another ticket and try again.

The good news is that you can try as many times as you can. The bad news is that you have to pay for each new ticket.

Our “Reverse Lottery” is essentially what the cryptographic puzzle is.

In the Reverse Lottery, each player is hoping that he generates the winning ticket number before someone else does.  Similarly, each Miner is hoping that he can generate (by ‘hashing’) the winning numbers before other miners do.

The good news is the miners are using hardware that generate millions of hashes per second.

The miner who finds the winning hash gets to add his “block” to the blockchain. In return he gets a reward. He also gets to collect transaction fees for all transactions listed in the block.

On average, a winning number (or winning hash) is found every 10 minutes. This average can be adjusted but we’ll talk about that later. And the miners move on to compete for the next winning hash. It’s kinda like a new Reverse Lottery every 10 minutes.

The process of trying to find the winning hash is called “Mining”.  The term actually originates from the traditional “mining” of gold. But instead of using a pick-axe to dig for Gold, Miners are using their computers to dig for the winning hash.

That’s pretty much it. You pretty much understand how the process works now.  But I may have left out one aspect. The Nonce.

Let’s go back to our Reverse Lottery.  Suppose the creators of this lottery decide to spice things up. They realize that they need to make lottery players feel more “involved”.

To achieve this, they add a new element into the Reverse Lottery. Now, instead of simply randomly generating a number they ask the player for the following information first:

The Reverse Lottery will take all three answers –  Bob, Green, 7 – and put it into a special “mixer”.  You can think of Bob, Green and 7 are the “ingredients”.  The mixer will spit out a Lottery Ticket for Bob based on the ingredients he gave it.

(Btw this is precisely what “hashing” is. A function/algorithm that takes “ingredients” and produces an output based the input.)

If the ticket matches the winning number – great! He wins! If not, he will have to try again – but this time with a different “random number”.  This will give him a new lottery ticket number.

Essentially, his name “Bob” and favorite color “Green” will remain fixed as ingredients. His ‘random number’ keep changing until he gets the winning lottery ticket.

In Mining, this “random number” is what we call the nonce. The other “fixed” ingredients are the transaction data, block data, timestamp etc.

The nonce is incremented after each failed attempt. (Fyi, the other ingredients are relatively fixed. They change when necessary – but that’s nitty-gritty stuff we don’t care about at them moment)