Mining uses powerful decentralized computers around the world to keep blockchains running—these blockchains are digital ledgers that record crypto transactions. In return for contributing their computing power, miners earn new coins. This creates a useful cycle: miners secure the blockchain, the blockchain gives out coins, and the coins motivate miners to keep supporting the system.
How Does Mining Work?
There are three main ways to get Bitcoin and other cryptocurrencies: buy them on an exchange, receive them as payment, or mine them. Let's look at how mining works using Bitcoin as an example.
In the early days of Bitcoin, almost anyone with a decent computer could mine. But as the blockchain grew, so did the computing power needed. By 2024, mining Bitcoin requires around six times more computing power than it did in 2009. This is because mining has become harder as more miners join the network.
Today, mining is mostly done by large companies or groups who use special hardware and combine their resources. Still, it’s useful to understand how it works.
Miners use powerful computers to verify new transactions and keep the blockchain secure. These tasks need huge amounts of computing power, which miners provide voluntarily.
Mining is similar to running a large data center. Companies buy mining equipment and pay for electricity and cooling. For mining to be profitable, the value of earned coins must be higher than the cost of mining them.
Miners compete in a race to solve a complex puzzle. They try to guess a 64-digit hexadecimal number called a "hash." The faster a computer guesses, the better its chances to win the reward.
The winner adds a new block of verified transactions to the blockchain and earns a reward in newly created Bitcoin. On average, this happens every ten minutes. As of April 2024, the reward is 3.125 Bitcoin per block. Over time, this reward decreases due to an event called "halving," until all 21 million Bitcoins are mined—expected by the year 2140.
After that, miners will no longer earn new Bitcoins but will receive transaction fees instead.
Why Is Mining Important?
Mining is essential not just for creating new coins, but also for keeping cryptocurrencies like Bitcoin secure. It verifies and protects the blockchain, making it possible for cryptocurrencies to run as decentralized systems—without the need for a third party like a bank.
It also gives people a reason to share their computing power with the network, helping the system grow and stay safe.
