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What is Crypto Mining and Why is it Important?

Cryptocurrencies and NFTs are two of the most googled words in recent days. The rising popularity and acceptance of both technologies are increasing day by day. While these two technologies get all the attention, there’s little talk about the technology backing both of these things, Blockchain Technology. In this article, we will take a closer look at the mining process in the blockchain and understand its importance.

A Simplified Explanation of Blockchain Technology

A Blockchain is an open database that stores the data of all transactions that have ever occurred. It stores the data in things called blocks, where each block stores some data plus the address of the previous block.  

All these blocks are interconnected, and together they form the blockchain. Each block in a blockchain has its own address, which is a combination of two of its properties. The total transaction count, and the data. Whenever the data changes, it results in a change in the address of its block. Remember how each of the blocks stores the address of the previous block. If any of the addresses change, we would need the address of the block to be updated in all the other blocks. This process can be very computationally expensive, and this is essentially mining. 

Depending on the number of miners present at any given moment, or the amount of data, it can take a long time to complete. This process happens on the computers of miners, who are given crypto for every block they mine. The time taken to mine a block is called “block time.” Different blockchains have different block times. The smaller the block time, the faster the blockchain is.

What do I require to Mine?

To start with the basic mining You need a crypto wallet, Bitcoin mining software or other cryptocurrency mining software, and mining hardware. Crypto Wallets are simply for encrypting and storing your earned crypto. There are two types of wallets; hot, and cold. A cold wallet is a physical storage system for your crypto data, like a hard drive. Hot wallets are for online purposes. 

Purchasing and operating mining equipment is the most difficult aspect of the mining process. Your mining rig will require a computer with sufficient capacity to mine, and enough power to keep it running.

These costly computers come in different forms. GPUs, which use multiple graphics cards and are frequently powered by Nvidia and AMD, can be used to handle mining calculations, such as a Bitcoin mining calculator, Ethereum mining calculator, Monero mining calculator, nicehash calculator, or other crypto mining calculator. More commonly today, devices like ASIC miner “Application Specific Integrated Circuit” are used for mining because they are more efficient. Generally, people buy specialized mining hardware for mining.

How does Crypto Mining Works?

Image source - Capital.com

Crypto mining is the process by which new tokens enter the market. When a transaction is submitted and authenticated, the process begins. A transaction block is created and distributed to every node in the network. This transaction is then validated by the nodes.

After the transaction is completed, the update is sent across the network. The block is then added as the next block in the blockchain. For their efforts in validating transactions, nodes are compensated in cryptocurrency. As the blockchain grows, the process will continue.

The mining process used by Bitcoin is referred to as Proof of Work (PoW). Mining here is accomplished through a complex mathematical calculation process.

Blockchain networks have adapted to a process called proof of stake (PoS) validation consensus protocols. In this system, participants stake their crypto to gain mining access. The more cryptocurrency they stake, the more they can mine.

Why Is Mining So Important?

Mining is the life and soul of the blockchain. It is important on several levels. Let’s take a look at them.

Blockchain is Inherently Secure: Blockchain developers have to spend less time making their applications secure because the blockchain provides out-of-the-box security because of mining.  

The powerhouse of the blockchain: The mining process is what powers the blockchain. Every change in a blockchain is a transaction, and to keep adding transactions, we need miners. At any given moment, a blockchain can have ‘n‘ number of miners. 

This is very powerful because a blockchain does not need a centralized server station, which needs a continuous source of electricity and an internet connection to keep itself running. The blockchain relies on miners, so a large blockchain can guarantee 100% uptime. 

Blockchain is a self-sustaining and self-expanding solution. It pays the miners for every block they mine. This attracts a lot of miners and expands the blockchain, as more computational power is added. 

Is Crypto Mining Legal?

People often ask, is Bitcoin mining legal? What is crypto mining in the eyes of the law? There are still no uniform international laws that regulate cryptocurrency and crypto mining. A few countries currently do not allow cryptocurrency, including Algeria, China, Russia, Columbia, and Bolivia. In these countries, mining is generally still allowed and even encouraged with incentives. Crypto mining has a reputation for its use by criminals on the dark web, which is why some countries have challenged its legality. 

Inevitably, Bitcoin and other cryptocurrencies have gained ground and approval as they have become more widely used. People are very much interested in buying products using crypto. The result has been ETFs and corporations in certain countries embracing Bitcoin. 


Because the blockchain is a public ledger, mining is a novel process for creating digital money. Blockchain and mining have changed the way we look at currency, banks, legislation, and decentralization. The challenge of mining comes down to the cost versus the reward of earning cryptocurrency. 

Mining is not only a way to earn crypto. It doesn’t matter if you are an individual miner or a massive mining farm funded by corporate or government money. Mining will impact the future. Mining is a legitimate means of being a part of a future where centralized banking becomes obsolete, replaced altogether by decentralized blockchain technology. It is also a movement that is changing the world. 

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