Cryptocurrency mining is the process of using computers to validate and record transactions on certain blockchain networks, such as Bitcoin, in exchange for newly created coins and transaction fees. It both issues new cryptocurrency into circulation and helps secure the network against fraud by making it computationally expensive to alter transaction history.
Basic idea
In many cryptocurrencies that use a system called proof of work, miners run specialized computers that repeatedly perform cryptographic calculations to “solve” a mathematical puzzle attached to a new block of transactions. The first miner to find a valid solution earns the right to add that block to the blockchain and receives a reward in the form of new coins plus any fees users paid for their transactions.
What miners actually do
- Collect pending transactions from the network and group them into a candidate block.
- Compete with other miners by trying enormous numbers of guesses (hashes) until one produces a result that meets the network’s difficulty target.
- Broadcast the winning block so that other nodes can verify it and extend the blockchain with this new, confirmed set of transactions.
Why mining matters
Mining keeps the blockchain decentralized by letting many independent participants, not a single authority, verify and record transactions. Because altering past data would require redoing an immense amount of work, mining makes successful attacks or double spending extremely difficult and costly.
Requirements and downsides
Effective mining usually requires specialized hardware (like ASICs or high-end GPUs), reliable mining software, and access to large amounts of relatively cheap electricity, since the process is energy intensive. The high power use can lead to substantial costs and environmental impact, and for most individuals, solo mining major coins like Bitcoin is rarely profitable without very efficient equipment or participation in mining pools.
