Up until a few years ago, the word mining would conjure up, in our minds, pictures of trucks digging the earth and miners working in caves. In fact, the classical definition of mining still states that “Mining is the extraction of valuable geological materials from the Earth and other astronomical objects.”

The modern day definition of mining has evolved a bit.

Mining Crypto

Crypto mining is when hugely complex mathematical equations are solved that verify new cryptocurrency to the blockchain.

While this sentence has a lot to unpack, we can simply state that just like our good ‘ol digging the mining, here, we are digging through mathematical equations to get ‘digitally shiny’ cryptocurrencies. The major cryptocurrency which made the word ‘mining’ famous is bitcoin.


Crypto Mining became popular with the release of Bitcoin in 2009 by an anonymous entity Satoshi Nakamoto. It gained popularity because its prices would surge wildly, attracting quite a crowd. 

One might think of mining themselves, however, these days crypto mining is only profitable for companies or groups that band together their resources. A decade ago, anyone with a decent home computer could mine. But these days the computational power required to mine is almost 12 trillion times more than what was required then.

As a result, amateur mining has almost died out. But it still doesn’t hurt to understand how crypto mining works!

Need of Crypto Mining

To understand the need for crypto mining, let us for a moment equate our traditional paper note currency to cryptocurrency. Each paper currency has a single time usability. For example, if you were to pay for goods using a $5 note, you are then unable to use the same note to go buy some lottery tickets. The factor of counter fake currency now comes into play. If you were to own one real and one fake $5 note, You might try and use them, however, if someone is keeping a check on the serial numbers of the notes, you will be caught. The same principle is applied to crypto as well.

All of those bitcoins, with the exception of those made by creator Satoshi Nakamoto through the genesis block (the very first block), were created by miners. The Bitcoin network would continue to function without miners, but no new bitcoin would ever be created. However, the final bitcoin won't be in circulation until close to the year 2140 because the rate at which bitcoins are "mined" decreases over time. This does not imply that transactional verification will stop. In order to maintain the reliability of the Bitcoin network, miners will continue to validate transactions and receive rewards for their efforts. You must be the first miner to find the correct answer—or the closest answer—to a numerical issue in order to receive new bitcoins. Proof of labor is another name for this procedure. Mining is the process of starting this proof-of-work action to solve the puzzle.

Crypto miners to verify that users have not fraudulently attempted to expend the same bitcoin twice. They do this using blockchain.

What is blockchain?

Bitcoin's fundamental technology is blockchain. Blockchain is a decentralized public ledger where transactions are documented in time order. The blockchain prevents modification or alteration of any document or transaction, making transactions secure from hacking. The smallest element of a blockchain is a block, which is a container for all the transactional information. Four fields, or main attributes, make up a block:

  1. Previous hash: The prior block's hash value is stored in this attribute, which is how the blocks are connected.
  2. Data: This is the total number of transactions that make up this block—the total number of transactions that were processed, verified, and added to the block.
  3. Nonce: The nonce is a random value used to change the output of the hash value in a "proof of work" consensus method, which bitcoin employs. The nonce is the parameter that is used to generate the hash value that each block is intended to produce. The blockchain's transaction verification method is the proof of work.
  4. Hash: This is the block's digital signature, and it was created by running the prior hash value, the data, and the nonce through the SHA-256 algorithm.

Blockchain is based on three core concepts.

  1. Public distributed ledger: A distributed ledger is a database of all events kept in the global blockchain network. Users of bitcoin perform transaction authentication on the network.
  2. SHA-256: Blockchain ensures that the blocks are kept secure by using a hash function called SHA-256 to avoid unauthorized access. They have a digital signature. Once generated, their hash number cannot be changed. SHA-256 is a one-way function that can only partially deduce the reverse of the input from the output. It accepts input strings of any length and gives a fixed 256-bit output.
  3. Proof of work: In blockchain mining, miners validate transactions by solving a difficult mathematical puzzle called proof of work. To do that, the primary objective of the miner is to determine the nonce value, and that nonce value is the mathematical puzzle that miners are required to solve to generate a hash that is less than the target defined by the network for a particular block.

Crypto Mining: How it works

Crypto mining is the only way to release new cryptocurrency into circulation. Therefore, miners are essentially "minting" money. For instance, out of a total of 21 million bitcoins, there were just under 19 million in existence as of March 2022. You must be the first miner to find the correct answer—or the closest answer—to a numerical issue in order to receive new bitcoins. Proof of labor is another name for this procedure. Mining is the process of starting this proof-of-work action to solve the puzzle.

There isn't really any complex arithmetic or computation involved. You may have heard that miners are adept at solving complex mathematical puzzles; however, this is not accurate because math is difficult in and of itself. In reality, they're competing to be the first miner to generate a 64-digit hexadecimal number (a "hash") that is either smaller than or equal to the goal hash. Essentially, it is conjecture.

So it is a question of randomness, but it is incredibly laborious work given that there are trillions of possible guesses for each of these issues. And with each new miner that enters the mining network, the number of potential solutions (also known as the level of mining difficulty) only grows. Miners need a lot of processing capacity to solve a problem first. You need to have a strong "hash rate" to mine successfully.

Being a coin miner can give you "voting" power when modifications to the Bitcoin network protocol are being suggested, in addition to the immediate benefits of newly created bitcoins. A Bitcoin Improvement Standard is what this is (BIP). In other terms, miners have some degree of control over decisions regarding things like forking. You need to vote for such projects more often the more hash power you have.

How to Mine

Since the most accredited cryptocurrency is bitcoin, let us take it as the target and start mining! Here are some of the basics one would need:

  1. Wallet: Any Bitcoin you obtain as a consequence of your mining efforts will be kept in this location. An encrypted online wallet is a place where you can keep, send, and receive Bitcoin and other cryptocurrencies. Exodus, Trezor, and Coinbase are just a few businesses that provide cryptocurrency wallet choices.
  2. Mining software: Numerous various companies offer mining software, much of it available for free download and compatible with both Windows and Mac computers. You'll be able to mine Bitcoin once the required hardware and software are linked.
  3. Computer equipment: The machinery is the part of bitcoin mining that is the most expensive. To effectively mine Bitcoin, you'll need a strong computer that consumes a lot of electricity. The component expenses frequently reach $10,000 or higher. ASIC machines, which in this instance are designed specifically to mine bitcoins, make up the majority of today's bitcoin mining equipment. As new chips are created and introduced every few months, ASICs today are many orders of magnitude more powerful than CPUs and continuously improve in terms of hashing power and energy efficiency.
  4. Mining pool: A mining pool is a collective group of cryptocurrency miners who pool their computing power across a network to increase the likelihood that they will successfully discover a block or otherwise mine cryptocurrency.
  5. Location: While not a significant point, location does play a role in increasing your chances of mining ‘digital gold’. Since bitcoin requires high computing power and therefore high electricity, locations with a reasonable price of electricity can add a few more bucks to your profit.

Once everything is set up and the system is running, it starts the mining procedure on its own. Any additional human participation only occurs when a system or network fails, there is a power outage, or when the system needs routine maintenance.

Environmental Impact

Crypto mining is certainly not for green thumbs. Cryptocurrency mining is a very energy-intensive process that jeopardizes the ability of governments all over the world to lessen our reliance on natural fuels, which contribute to global warming.

Mining is an automated method of validating deals without the involvement of banks or other reputable third parties. The network relies on the computational power of thousands of mining machines, so the way the transaction validation procedure is designed uses a lot of energy. Proof-of-work consensus-based cryptocurrency blockchains are kept secure by this reliance.

Even in the current times, the majority of countries are majorly dependent on fossil fuels for their energy requirements. 

If cryptocurrency and its mining have to exist in the future, then we must be mindful and work equally towards harvesting energy from alternate sources, greener sources.


To comply with local laws, crypto miners typically only need to be informed of the rules governing the use of data systems and electricity. To protect investors and establish safety standards in this industry, many nations are progressively introducing laws that are unique to Bitcoin and cryptocurrency mining.

With regard to the USA, almost all states are legal to mine bitcoins; New York is the lone exception; however, some organizations and authorities may impose limitations. The U.S. Marine Corps, for example, prohibits service members from mining cryptocurrencies with equipment that was given by the state. Although the limitation, in this case, might be motivated by security concerns, the majority of laws governing Bitcoin mining are motivated by concerns about energy consumption. A two-year ban on specific cryptocurrency mining operations that use proof-of-work methods to validate blockchain transactions was imposed by the mining legislation in New York, which was passed by the State Assembly and the State Senate in late April and June 2022. Proof-of-work mining is the process used to generate Bitcoin and other tokens, and it requires expensive hardware and a lot of electricity.

Profitability of Crypto Mining

Every four years or so, the Bitcoin mining benefits are cut in half. The expense of the AISC hardware, the amount of electricity used, and the efficiency of the mining software all play a role in how much money can actually be made with Bitcoin. The profitability of Bitcoin mining has fallen recently compared to previous years due to increases in electricity costs, more expensive hardware, the difficulty of mining as a result of increased rivalry, and falls in Bitcoin prices. Bitcoin mining was first started using CPUs and simple AI algorithms, which made it lucrative and less expensive. According to the Cambridge Bitcoin Electricity Consumption Index, bitcoin mining uses more power than most nations, 94 terawatt-hours annually. By August 2021, it is believed to take 9 years for an average American household to mine just one bitcoin.

Anyone who wants to earn money by mining cryptocurrencies has two options: they can go it alone with their specialized equipment or they can join a mining community where several miners and their equipment work together to increase their hashing output.

Mining for cryptocurrencies is time-consuming, expensive, and rarely profitable. However, because miners are compensated for their labor with cryptocurrency tokens, mining has a magnetic allure for many investors who are interested in cryptocurrencies.