What is mining and how does it work in cryptocurrency?

Cryptocurrency mining is the process of verifying and adding new transactions to the blockchain, which is the public ledger of all cryptocurrency transactions. In return for their efforts, miners receive newly created cryptocurrency units as well as transaction fees.

Cryptocurrency mining requires a computer with specialized hardware and software to solve complex mathematical problems. Miners compete against each other to be the first to solve these problems and add a new block to the blockchain. The first miner to do so is rewarded with newly created cryptocurrency and transaction fees. This process is known as proof of work.

Mining cryptocurrency requires a significant amount of computing power, which requires a lot of electricity. Therefore, miners typically operate in areas with low electricity costs and high-speed internet connections. Some cryptocurrencies, such as Ethereum, are transitioning from proof of work to proof of stake, which requires less energy.