Crypto mining is a process that uses specialized computing hardware to verify and record cryptocurrency transactions on a blockchain. Here's how it works:
- Transactions are grouped into a pool of unverified transactions.
- Miners bundle these transactions into a block and compete to solve a complex mathematical puzzle called Proof of Work by finding a special number called a nonce.
- The goal is to produce a hash that meets a difficulty target set by the network.
- The first miner to find a valid solution broadcasts it to the network.
- Other miners verify the solution's accuracy and if confirmed, the new block is added to the blockchain, officially confirming the transactions.
- The successful miner receives rewards, which include transaction fees and possibly newly minted cryptocurrency tokens.
- The difficulty of the mining puzzle adjusts over time to maintain a steady pace of block creation, and some cryptos reduce mining rewards over time (reward halving).
Mining requires powerful computers like ASICs or GPUs, significant energy, and sometimes miners combine efforts in mining pools to increase chances of rewards.
