What Is Cryptocurrency Mining?

Cryptocurrency mining and How it Works


Cryptocurrencies works on the concept of decentralization. So instead of passing authority to a single identity, the networks work as a whole to reach a consensus to ensure safe and secure transactions.

To understand how cryptocurrencies works, it is important to understand the mining process.


What is Cryptocurrency Mining?

In broader terms, Cryptocurrency Mining is a complete process that is responsible for verification of transactions, introducing new coins to the system, and marinating the uniformity of blockchain ledger. Not all cryptocurrencies are available to be mined.


How does Cryptocurrency Mining work?

We will explain the process step-wise with the role and responsibilities of each party involved in the mining process.


Miner: A system or person who is attached to the network and is responsible for verification of transactions and organizing them in the blockchain. It is also known as “node”.


Memory Pools: Miners verify the transactions and add them to a single storage place known as memory pools. The Block of multiple transactions is assembled in the memory pools.


Hash Tree: Miners adds the new transaction and send themselves mining reward, which is the creation of new coins in the system.

After this, the transaction blocks are “Hashed,” i.e. generation of a secure code. Now that blocks are hashed they are arranged in pairs and converted into a form of a “tree” with a single “root node” at the top known as “root hash”.


Root Hash: Root hash is then attached to the previous block hash (to maintain the ledger) and a random number and then added to block header, block header number serves as the identifier to the complete block.


Block Header/Identifier: Block header value must be less than a specified target value or number that is known as hashing difficulty. The value Hashing difficulty is scalable and is determined according to the number of new blocks created and is proportional to the hashing power in the network.


Valid Hash: The miners keep hashing the header until one of them finds the correct hash. When a valid hash is found the miners in the network are notified who are then responsible for checking if the hash is valid, and if valid the block is added to the blockchain and the process for the next block mining starts over.


Bitcoin Mining

The above process also explains the Bitcoin mining process. The Bitcoin mining process is one of the ways by which new coins are generated in the system. Over time the number of coins, i.e. reward value of successful mining is decreased and will reach zero eventually.


Is Bitcoin Mining Profitable

In the start, Bitcoin mining was profitable as the number of miners was less, and the hardware requirements were not so much. Over time as the people became interested in the mining process, the number of miners increased that eventually resulted in costly hardware requirements, so the profitability decreased overtime.



This was our brief overview of cryptocurrency mining and how it works. We covered almost all the aspects and features of the mining process. The mining process is a smartly designed system that helps in running the network in the long term. Since the system is decentralized, so it has to rely on the participation of the users in the network that helps both the user and the system.


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