What is Mining? Mining Explained.

Last Updated on October 15, 2023

In the context of cryptocurrencies, mining refers to the decentralized computational process wherein new coins are introduced into the circulation and transactions are added to the blockchain. Miners use powerful computers to solve cryptographic puzzles; if successful, they have the chance to add a new block to the blockchain and receive a reward in return. This reward typically consists of newly minted cryptocurrency coins and transaction fees. The mining process validates and secures transactions, making the blockchain resistant to fraudulent activities and hacks.


Why is it called “mining”?

The term “mining” draws an analogy to the mining of gold or other precious metals. Just as gold miners exert effort to find and extract gold from the earth, cryptocurrency miners use computational power to “extract” new coins from the algorithm set by the cryptocurrency.

What is the “proof-of-work” in relation to mining?

Proof-of-work (PoW) is a consensus algorithm used by many cryptocurrencies, including Bitcoin. In PoW, miners compete to solve a cryptographic puzzle, and the first to solve it gets to add a new block to the blockchain. This process ensures that it’s costly and time-consuming to produce new blocks, making the blockchain secure against attacks.

How does mining ensure the security of a blockchain?

By requiring miners to solve complex puzzles, mining ensures that adding false transactions to the blockchain is computationally impractical. A malicious actor would need to control more than 50% of the total mining computational power (often termed as 51% attack) to compromise the network, which is expensive and challenging to achieve.

Are there alternatives to the traditional mining process?

Yes, other consensus mechanisms like “proof-of-stake” (PoS) and “delegated proof-of-stake” (DPoS) have been developed as alternatives to PoW. These mechanisms aim to achieve blockchain consensus without the high energy consumption of traditional mining.

What are mining pools?

A mining pool is a collective of individual miners who combine their computational resources to increase their chances of solving the cryptographic puzzle. When the pool successfully mines a block, the reward is distributed among the pool members based on their contributed computational power.

Author of This Article:

Rahul Bhatia

Rahul Bhatia

Rahul Bhatia

Rahul Bhatia

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