Cryptocurrency mining (or cryptomining) is the process in which computers solve complex mathematical problems in order to retrieve cryptographic keys that attach the blocks of transactions on a distributed ledger. In exchange for these computations, rewards in the form of coins or tokens for the specific blockchain are given
Now, “blocks” aren’t necessarily the first things that come to mind when thinking about an interlocking chain. Chains are interlaced. That means that the shapes themselves should also link. Besides the obvious fact that we are talking about digital blocks (a bundle of transactions), interlacing is irrelevant with blockchain. Each block is linked by a separate cryptographic key. The computer nodes and networks which process transactions to advance the blockchain compete to solve computational problems and discover the cryptographic keys that will connect the blocks. Once a key has been discovered, it is passed to the entire distributed ledger network and checked for validity. If it is accepted, then the computers doing the mining move on to the next mathematical challenge to uncover the next cryptographic key. Whichever computer discovered the key is the one that gets rewarded.
There is also another reason why computations are required to perform these functions in order to add to building the blockchain. It was perhaps the most innovative contribution of Satoshi Nakamoto (the presumed pseudonym of the creator of Bitcoin). Performing problem solving in order to add to the blockchain is called “proof of work” and means that a computer must show completion of tasks in order to participate in building the blockchain. For even more complex reasons that we will not go into here, it is also related to why it would be so difficult to ever hack a long blockchain. The enormous amount of computer work required to reverse engineer the keys to the chain would be extremely prohibitive.
But mining isn’t just about this process of getting rewarded for finding keys that connect the blocks on a distributed ledger. There’s a global industry of mining with its own complications,successes and failures. At the heart of the physical act of mining are the computers, lots and lots of computers, busy churning through code 24/7 to earn those rewards and support the blockchains running multiple cryptocurrency platforms as well as DApps and smart contracts.
In the early days of cryptocurrency mining, around 2009–2012, — a gaming computer was fast enough to turn a profit from mining after taking into consideration the electricity being consumed. In the case of Bitcoin, the number available for distribution to the market has decreased while the amount of required computations has increased. So, a race has been on for faster computers to make mining for all cryptocurrencies more profitable and efficient. Thus, the advent of the mining farm: a collection of many miners, often in a warehouse or large data center devoted solely to mining cryptocurrencies. They have made individual miners — regardless of computer speed — much less competitive. For more on this, check out what ASICS are doing to cryptomining and hash rate (the measure of a miner’s performance).
Lastly, you can’t really talk about cryptocurrency mining without discussing the enormou samount of energy being used by the computers and supporting operations doing it. One recent Forbes article said that Bitcoin mining uses as much energy as Ireland. There is no doubt that the energy consumption used by mining will become a significant issue to address in the future.
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