Mining is the process by which networks of specialized computers generate and release new Bitcoin and verify new transactions. Mining is the process that Bitcoin and several other cryptocurrencies use to generate new coins and verify new transactions. It involves vast, decentralized networks of computers around the world that verify and secure blockchains – the virtual ledgers that document cryptocurrency transactions. In return for contributing their processing power, computers on the network are rewarded with new coins. It’s a virtuous circle: the miners maintain and secure the blockchain, the blockchain awards the coins, the coins provide an incentive for the miners to maintain the blockchain.
There are three primary ways of obtaining bitcoin and other cryptocurrencies. You can buy them on an exchange like Many bitcoin wallet, receive them as payment for goods or services, or virtually “mine” them. It’s the third category that we’re explaining here, using Bitcoin as our example. You might have considered trying bitcoin mining yourself. A decade ago, anyone with a decent home computer could participate. But as the blockchain has grown, the computational power required to maintain it has increased. (By a lot: In October 2019, it required 12 trillion times more computing power to mine one bitcoin than it did when the first first blocks were mined in January 2009.) As a result, amateur bitcoin mining is unlikely to be profitable for hobbyists these days. Virtually all mining is now done by specialized companies or groups of people who band their resources together. But it’s still good to know how it works.
Beyond releasing new coins into circulation, mining is central to Bitcoin’s (and many other cryptocurrencies’) security. It verifies and secures the blockchain, which allows cryptocurrencies to function as a peer-to-peer decentralized network without any need for oversight from a third party. And it creates the incentive for miners to contribute their computing power to the network.