Learn / Beginner · Mining and Staking

What is mining?

Beginner · Mining and Staking · about 3 min read

Mining is how some blockchains, including Bitcoin, check new transactions and add them to the chain. People called miners use powerful computers to do it, and they are paid for the work.

How it works

Miners collect waiting transactions into a block. Then their computers race to solve a hard puzzle by making an enormous number of guesses. The first one to find a valid answer adds the block to the chain and is rewarded with newly created coins plus the fees from the transactions in it.

This method is called proof of work. The puzzle cannot be shortcut, so the only way to win is to do real work.

Why it matters

Mining does two jobs. It keeps the network honest, because changing an old block would mean redoing all the work after it, which costs a huge amount of electricity and equipment. It is also how new coins enter circulation. On Bitcoin, the reward per block is cut in half roughly every four years, an event called the halving.

Keep in mind

• Mining uses a lot of electricity, and Bitcoin mining today needs specialised machines, not an ordinary laptop.
• Not every blockchain mines. Ethereum stopped mining in 2022 and uses staking instead, which a later lesson covers.
• Be wary of offers to “mine for you” for a fee, or to join a mining or crypto “job” that asks you to pay first. The US Federal Trade Commission warns that anyone who asks you to pay upfront to get a job is a scammer.

Key terms

Miner, block, proof of work, block reward, halving.

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