This guide uncovers the crypto mining definition and explains what exactly this process means for the blockchain industry.
What Is Crypto Mining?
Crypto mining is the process that Bitcoin and some other cryptocurrencies use to verify and validate blockchain transactions and generate new coins.
What You Need To Know About Crypto Mining
Crypto mining involves decentralized networks of computers worldwide that verify and secure blockchains. In return for the contribution of processing power, the miners on the network who own the devices receive new coins.
The crypto mining process consists of four major steps:
- Hashing transactions. For a block to be mined, pending transactions are taken from the mempool and submitted through a hash function. Each piece of data will generate a fixed-sized output called a hash, which will work as the transaction’s identifier. Miners also add custom (coinbase) transactions, in which they send themselves the block reward.
- Creating a hash tree. Once all transactions are hashed, the hashes are organized into a hash tree (Merkle tree). It is formed by pairing the hashes and hashing them. The new outputs are then paired and hashed again and again until a single root hash is created.
- Finding a valid block hash. A block hash (block header) is a unique identifier for each block. Crypto mining enthusiasts merge the hash of the former block with the root hash of a candidate one to create a new block header. Then, they add a nonce and submit the combination of the three elements through a hash function to create a valid hash.
- Broadcasting the mined block. The miner that finds a valid hash broadcasts their block to the network. The rest of the nodes will verify if the block and its hash are valid and, if so, add the new block to their blockchain copy.
The final step means that the candidate block gets confirmed, and all miners move on to the next one. Those who couldn’t find a valid hash on time discard their candidate block, and the crypto mining race restarts.
