Definition: crypto mining

(CRYPTOcurrency mining) The competitive process that adds the next batch of transactions to a proof-of-work (PoW) blockchain. Proof of work means solving a mathematical puzzle, and the next "miner" to solve it, which is roughly every 10 minutes for Bitcoin, is rewarded with transaction fees and freshly minted crypto tokens (see Bitcoin halving).

After deciding which of the new transactions coming in from around the world meet the miner's financial goals; for example, which ones offer higher fees, and before combining them into a batch, the mining process verifies the integrity of the transactions to make sure they are constructed correctly.

Bitcoin is the primary example of this proof-of-work system, known as a "consensus mechanism." Ethereum was initially proof-of-work but changed to proof-of-stake (see Ethereum 2.0). Following are the ways mining is performed. See proof-of-work algorithm, consensus mechanism and Bitcoin vs. Ethereum.

Individual Miners
Anyone can purchase specialized miner hardware and connect to the Internet. This was feasible for Bitcoin in the early 2010s, but it could take years to make any money today. However, new cryptocurrencies come online all the time, and if they employ proof-of-work with an easier puzzle, a single mining rig or even regular computers with a GPU may be sufficient for mining. See proof-of-stake algorithm, miner hardware and GPU.

Mining Pools
Organizations combine their resources to obtain a huge amount of specialized mining hardware. Mining pools are also open to the public, whereby anyone can add their computers to the network. See pool mining.

Cloud Mining
People can rent time on a cloud mining service and pay a monthly fee. See cloud mining.

Mining Energy
Bitcoin mining consumes a huge amount of electricity. This was also the case with Ethereum before its consensus method changed (see Ethereum 2.0). It has been said that Bitcoin, combined with Ethereum 1.0, consumed as much energy as the entire country of Pakistan with more than 230 million people. Contrast with crypto minting. See crypto mining malware, blockchain, Bitcoin mining and cryptojacking.

Bitcoin Mining

The CleanSpark renewable energy company uses its facilities to mine Bitcoin in upstate New York and Georgia. The equipment in these images are specialized mining machines (see miner hardware). (Images courtesy of CleanSpark.)

Everything About Mining

Peter Kent and Tyler Bain explore crypto mining in depth. For anyone who wants to know the ins and outs of this complicated business, their book is must reading.