The term crypto-mining means the mining of cryptocurrencies by solving cryptographic equations using computers. This process involves validating blocks of data and adding transaction records to a public record (ledger) known as the blockchain. The method by which Bitcoin and other cryptocurrencies are generated and transactions verified with new coins is called mining. It involves massive, decentralized networks of computers around the world that verify and secure blockchains, which are virtual ledgers that record crypto transactions. Computers on the network are rewarded with new coins for providing their computing power. This is a virtuous cycle: The miners keep the blockchain secure, the blockchain rewards the miners with coins, and the coins incentivize the miners to keep the network secure.
Most people think of crypto mining as simply creating new coins. However, crypto mining also involves validating cryptocurrency transactions on a blockchain network and adding those transactions to a distributed ledger. Most importantly, crypto-mining prevents digital currencies from being double-spent on a distributed network. As with physical currencies, the digital ledger must be updated when a member spends a cryptocurrency by debiting one account and crediting the other. The challenge with a digital currency, however, is that digital platforms can be easily manipulated. Bitcoin’s distributed ledger therefore only allows verified miners to update transactions on the digital ledger.
This gives miners the added responsibility of protecting the network from double spending. Meanwhile, new coins are generated to reward miners for their work in securing the network. Since there is no central authority in distributed ledgers, the mining process is critical for validating transactions. Miners are therefore incentivized to secure the network by participating in the transaction validation process, which increases their chances of winning newly mined coins.
