Mining
Mining is the process used by proof-of-work blockchains in which specialised computers perform computational work to compete for the right to add new blocks. Bitcoin is the most prominent example.
✦ Key Insight
Mining helps secure proof-of-work blockchains, validate transaction history, and distribute new coins according to protocol rules. Mining economics can also affect the market through miner selling, hash rate changes, energy costs, and equipment investment.
✕ Common Misconceptions
Assuming miners manually approve transactions
Confusing mining with staking
Ignoring energy and hardware costs
Assuming every cryptocurrency is mined
Treating mining revenue as pure profit
Ignoring mining difficulty
Detailed Explanation
How It Works
Miners collect valid transactions and construct candidate blocks.
They repeatedly perform cryptographic calculations in an attempt to find a valid proof that meets the network's difficulty requirement.
The successful miner broadcasts the block.
Other nodes verify it.
The miner receives a block reward and eligible transaction fees.
FAQs
Does Ethereum use mining?
No. Ethereum now uses proof of stake.
Can individuals still mine Bitcoin?
Yes, although industrial-scale competition makes profitability challenging.