Cryptocurrency mining: How does it works?

What does it mean to mine cryptocurrencies?

This answer encompasses many myths on the subject of cryptocurrency mining. Mining cryptocurrencies is not creating them out of thin air or forging them with special programs, cryptocurrency mining refers to a set of processes necessary to validate, process, and confirm transactions of a cryptocurrency.

In the case of bitcoin, mining consists of validating and recording transactions on a blockchain. For this, all the nodes of the network (the computers) participate in the successful resolution of the riddle that involves the search for the block, taking into account a random number and with the application of a cryptographic function, a hash is found as a result, which complies with a characteristic, which always has a certain number of characters.

What is needed?

This work requires effort and computational power, which ensures how complex it is to write new transaction blocks to the registry and thus prevent an attacker from generating a fake block and adding it to the blockchain affecting already existing blocks.

Do all mine work the same way?

Not all cryptocurrencies work in the same way, so the way they mine depends on the system that uses the blockchain or algorithm of each cryptocurrency. However, one thing they all have in common is that there are never any useless operations between miners, but rather they are necessary to maintain the stability and security of the network being used.

Since the miners’ work is so important they charge an amount of money for their mining work. In the case of bitcoin when a miner finds a valid block he is rewarded, since February 2021 for each new block a miner earns 6.25 bitcoins. The payment is made with coins that are in reserve and at that moment they enter into circulation, so it is erroneously believed that cryptocurrency mining consists of creating new coins.

The coins are already previously defined, however, the job of mining is to bring more coins into circulation.