How Crypto Mining Works

How does cryptocurrency mining work? Just like gold is mined so also are crypotcurrencies. However, while a gold miner needs tools such as excavator, high-bankers, and slurry pumps to do his job, a crypto miner, on the other hand, needs hardware such as a customized PC with important, core elements such as CPU, motherboard, RAM, and adequate storage facilities. All these assembled together make up the “crypto mining rig.”

Cryptomining (Source:

As a crypto miner, your job is to validate the hashes of unconfirmed blocks by solving cryptographic problems and get rewarded with bitcoins in return. And, that is an energy-intensive job. In fact, according to a report presented to the U.S. Senate Committee on Energy and Natural Resources in August 2018, bitcoin mining was accounting for about 1% of the world’s energy consumption. 

Its roles

So, what roles does crypto mining play within the blockchain and cryptocurrency itself?  Who controls a cryptocurrency? First, cryptocurrencies are made available for the public to invest in via initial coin offerings (ICOs). In an ICO, the first batch of the coins is pre-mined. However, once they are exhausted, there would be a need to mine more. Take Bitcoin as an example. Only 21 million bitcoins will ever be created. Currently, there are at least 18, 691,287.5 in existence, with more being added every 10 minutes.

Mining creates new blocks of authenticated transactions which are then incorporated into the blockchain. Every new block mined adds 6.25 more bitcoins to the bitcoin pool. This way, crypto mining helps to maintain and develop the blockchain itself. Therefore, while blockchain is designed to be decentralized, mining, through the solving of complex cryptographic or mathematic problems usually by trial and error, provides a way for transactions to be authenticated on it.

Solving those problems is not easy. In fact, the odds of being able to solve them is minute – just 1 in almost 6 trillion.     

Using Blockchain to Solve the Payment Riddle

Before you can understand how blockchain can be used to solve the payment riddle, you first need to understand how it works. When is a new block created? As earlier discussed, a block, though mining, is created on the blockchain when permanent records of transactions are confirmed. Those transactions, in addition to being immutable, cannot be traced. Blockchain cannot be hacked because records of those transactions, the blocks, are not stored on a central server; instead, they are distributed across a massive network of computers. As a result, a hacker trying to break through the integrity of the blockchain has to verify all the records across those computers. That is some tough luck! 

So, how can blockchain solve the payment riddle which is how to move value peer-to-peer without any trusted central intermediary? It can. In fact, it already does. It does by verifiably moving “data” as a decentralized network. The traditional financial system anyway is fraught with centralized intermediaries that concentrate risks and exploit economic rents. As a result, it is highly prone to repeated crises and instability. Fiat currencies, for example, because of unsound economic policies, are too risky to bank upon. Besides, blockchain can also help to drive financial inclusion campaigns. And, the good news: who regulates cryptocurrency and blockchain? The answer is no one.

In conclusion, you do not need to worry if cryptocurrency will fail. Presently, the underlying technology, the blockchain, is solid. Beyond cryptocurrency, it has even started to gain traction in many other areas of life. 

The information on this website and all associated literature are for educational and informational purposes. It does not constitute a fiduciary duty or obligation between Uncut Lab and you. Please consult your financial and investment professional for your specific situation.



I am the Uncut Lab resident cloud computing junkie. I help curate the written content in our Education Corner, providing engaging articles on foundational concepts in cloud computing, data analytics, machine learning, and blockchain technology. Feel free to reach out to me with questions or topics that you would like us to cover. Thanks!

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