A Simple Way to Understand Cryptocurrency Mining

When it comes to the term ‘mining’, then it becomes easier to relate it with a physical commodity like gold or oil but things become difficult to understand when we use the term ‘mining’ for a virtual currency. The currency that we see in daily circulation is printed by the government, so the set idea for some people is that a currency must be printed by any authority. However, cryptocurrencies are mined and this becomes a question for many people who are unaware of this process and terminology. So in this article, we will be discussing the basic details which will help you to understand the term cryptocurrency mining.

Before we get started with explaining the details of cryptocurrency mining, we must become familiar with the term ‘blockchain’ because it is the core technology behind the functioning of cryptocurrencies. In day to day businesses, people maintain a ledger for recording their business transactions. Similarly, blockchain is also a ledger for the cryptocurrency network which keeps a record of the transactions taking place on this network. The blockchain is a digital ledger which not only records transactions; it also sends the copies of these transactions to every node which are connected on this network.

The nodes also communicate with each other to ensure that the copies of transactions are same everywhere throughout the network. Because of this entire system, the information related to transactions is not only publicized but it also becomes decentralized which makes it difficult to make manipulations related to transactions. The network rejects any transaction where the copies of the transactions are not the same.  This entire process of blockchain communicating with its nodes and distributing its copies ensures that faulty double transactions do not take place during the entire process.

All new transactions taking place are grouped in various blocks which need to be added to the existing cryptocurrency blockchain ledger. In order to ensure that these blocks get added to the blockchain ledger, the transactions in these blocks must be validated by solving a complex maths problem for which people used mining rings and hardware. These people who validate the transactions are called miners and they are awarded a portion of the cryptocurrency for their mining efforts. The validation method employed here is also called as “proof of work” (POW) as they must be validated by third parties in order to get authenticity.

Cryptocurrency miners not only validate transactions, but they also generate new cryptocurrencies from the system by solving complex maths problems using expensive hardware or mining pools. So, the process of mining is useful both for creating new cryptocurrency coins and for validating crypto transactions.

Author Bio: S Kumar is a freelance cryptocurrency article writer. You can find more about his crypto writing services at