Mining is the process by which transactions are verified and added to a blockchain.

There are several types of blockchains. The most well-known are Proof-of-Work (PoW) and Proof-of-Stake (PoS). In a PoW system such as Bitcoin, transactions are verified by a process called mining. The miners receive a reward for their verification in the form of Bitcoin, this is a block reward.

What does a miner do?

A miner (also called a mining node) validates transactions from the memory pool. This memory pool contains all transactions that have not yet been verified. A miner collects multiple transactions and puts them together in a candidate block. This is a block that has yet to be added to the blockchain. In this candidate block, the miner also adds a transaction for himself. This is the reward for creating a block. A miner receives this reward only if the block is also added to the blockchain. Each transaction in a block is then hashed. This means that the transaction data cannot be seen verbatim. Eventually, all the hashes are combined into a single hash. This hash must be under a value that is predetermined. The miner who manages this first has the answer and this miner's block is added.


A Proof-of-Work consensus mechanism is known as one of the most secure ways to maintain a blockchain. This is because there is no central party that can unilaterally add or reject transactions. In addition, miners are generally spread around the world. In case the power goes out on an entire continent, there are still enough miners left to keep the blockchain running. This decentralized aspect comes under more pressure as the puzzles for miners become more difficult. This is because the heavier hardware is expensive, making mining increasingly difficult for individuals. That mining becomes more difficult also means that a 51% attack becomes more difficult. So this is positive. On the other hand, mining also becomes more centralized because it becomes more difficult for small parties to obtain the hardware, this is a disadvantage.

Increasing difficulty

Finding the right hash becomes increasingly difficult as a blockchain expands. This also means that heavier and heavier computers are needed to mine. Around 2010 when Bitcoin was new, mining could be done on a smartphone because the solutions were easy. A decade later, there are companies that have entire buildings full of computers to mine. A major cost for these companies is electricity. Because computers are increasingly heavy, more power is used. For that reason, mining is often done in places where electricity is cheap, such as western China where much of the electricity is generated by hydroelectric power. However, China has been applying strict regulation since 2022, which has caused many miners to cross the border into kazakhstan. There are few places where there are clear regulations regarding mining. For this reason, miners often get ahead of such regulations and are turned away afterwards.