By: Sameer Zubairi | 3 min read | 21/01/2019

Mining For Crypto Gold


Mining for a digital asset sounds pretty counterintuitive, I mean how is it even possible to mine something that only exists virtually? This is because mining in the context of cryptocurrency doesn’t require a hard hat or a pickaxe, but instead relies on powerful computer processors and large amounts of storage space. Mining is the process of authenticating cryptocurrency transactions by solving puzzles and producing new blocks on the blockchain to store this information.

It is absolutely essential for the survival of most popular cryptocurrency networks since it’s the underlying process that allows them to act as a medium of exchange. Without mining, none of it would be possible, which is why most cryptocurrency networks offer miners an attractive incentive. Therefore, if you possess the right amount of computing power and electricity, mining can be a profitable endeavor.


Mining has become a cornerstone of the cryptocurrency world and has sparked growth in several different computing industries. Since the popularity of mining goes hand in hand with the popularity of cryptocurrency, the bullish crypto markets of 2017 really helped mining take off on a large scale. The essential purpose of mining is the verification of blockchain transactions.

How this is accomplished can be a little complicated, but the basic method requires the solution of complex mathematical problems to produce a cryptographic message which meets specific criteria. If a miner accomplishes this, then the participants of the network are notified and a new block containing the transaction data is added to the blockchain. The miner is subsequently rewarded with a coin for their efforts of verifying the transaction data.


This is a very simplified version of mining, so let’s go a little deeper. To truly understand how mining works, we should first define some important terms. Let’s start with hash functions. Hash functions are simple to understand. Their main purpose is to take a string (like a number + transaction info) and produce a hash value, which is a cryptographic series of numbers and letters that represent the underlying information.

Mining requires the nodes (any device linked to the blockchain) competing to produce the next block to come up with a number known as the nonce. A nonce is a number that only appears in a database once. When combined with the transaction data and run through a hashing function, the first to produce a particular hash matching the criteria set by the rest of the network is awarded the task to produce the next block on the chain. This person is known as the miner.

Miners are constantly competing to produce a hash that contains a valid nonce value. When a miner successfully determines a number which produces the correct hash, the remaining miners are notified to move on and a block containing the transaction data and cryptographic hashes is generated and added to the blockchain. The miner then receives a block award for their efforts which is usually a coin or token associated with the blockchain.


Mining plays a very fundamental role in what makes cryptocurrencies so revolutionary. They provide a trust-less way to exchange valuable assets over the internet. The underlying concepts may seem confusing, but in general terms, mining is a very essential process.

The incentives surrounding mining are also very appealing, but it is important to consider these in conjunction with the high energy and hardware costs before attempting to run a full mining node.

All in all, understanding these technical concepts of cryptocurrencies and blockchain can help differentiate these assets from one another, ultimately allowing for more informed investment decisions.

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