What is Digital Currency Mining?
Bitcoin, just like many other digital coins, is created through the technological process of “mining”. Unlike the minting/printing of fiat money, this process resembles the mining of commodities, i.e. gold, as it presupposes a prior investment of effort, in this case computational power, for an eventual release of coins.
The Blockchain is a distributed data structure which keeps record of the entire transaction history of the relevant coin, in the past and present. This data structure is maintained by a distributed network of nodes (miners), which is transparent and also publicly accessible to anyone. Yet to be confirmed transactions are bundled into blocks by miners, who also cryptographically encode the contained information.
In order to validate the new block of transactions, miners use an algorithm to solve a coding problem set by the Blockchain’s protocol. This process is time- and energy-consuming, as it requires a high amount of computational power, which can nowadays only be efficiently delivered by professional large-scale mining farms. Once a miner finds the solution to the mathematical problem, the transactions within the block are confirmed and broadcasted to the miners via the blockchain. Bitcoins are then emitted to the successful miner as reward for the invested proof-of-work for the validation of the transactions.