How Cryptocurrency Mining Works



Mining for cryptocurrencies such as bitcoin, whether via the cloud or locally, does not actually involve any mining. And while this process does generate new cryptocurrency tokens that are awarded to miners, the mining operation serves a much more crucial purpose for maintaining the security of a distributed ledger such as a blockchain. Bitcoin mining is performed by high-powered computers that solve complex computational math problems; these problems are so complex that they cannot be solved by hand and are complicated enough to tax even incredibly powerful computers.

When cryptocurrency miners add a new block of transactions to the blockchain, part of their job is to verify that those transactions are accurate. In particular, bitcoin miners make sure that bitcoin is not being duplicated, a unique quirk of digital currencies called “double spend.” With printed currencies, counterfeiting is always an issue. But generally, once you spend $20 at the store, that bill is in the clerk’s hands. With digital currency, however, it's a different story. The miners use their computational power to solve cryptographic puzzles that prevent double spend in a decentralized manner.