What Is Mining?
Mining is the engine that powers the Bitcoin network. It's a competitive process where individuals and companies use powerful computers to solve complex mathematical puzzles. This essential work both secures the network and creates new bitcoins.
Proof-of-Work
This process is called "proof-of-work." By dedicating immense computational power (hash rate), miners prove they have expended real-world resources, making it prohibitively expensive to attack the network.
Securing the Blockchain
The primary role of mining is to validate new transactions and add them to the blockchain. The winner of the computational race gets to create the next block, effectively finalizing a new batch of transactions for the entire world to see.
Creating New Coins
As a reward for their work, the successful miner receives newly created bitcoins (the "block reward") and any transaction fees from the block they created. This is how new bitcoins enter circulation.
A Global Competition
Mining is performed by a decentralized network of participants all over the world. This distribution of power is fundamental to Bitcoin's value proposition, ensuring no single entity can control the network or censor transactions.
Mining Approaches: Pooled vs. Solo
Because finding a block is incredibly difficult, miners can choose between two main strategies.
Pooled Mining
Most miners join a "pool" where they combine their hash rate with others. When the pool finds a block, the reward is shared proportionally among all participants based on their contribution. This provides smaller, but more frequent and predictable payouts.
Solo Mining
A miner works alone. They receive the entire block reward if they find a block, but the chances of doing so are extremely low unless they have a massive amount of hash power. It's a high-risk, high-reward strategy.