Mining

Mining is the process of using computing power to verify transactions on a blockchain and receiving newly created coins in return. Nothing is dug up. Miners compete to solve a hard math puzzle first, and the winner earns the right to add a block of transactions to the ledger plus the reward.

Why go to all that trouble? In a system with no central authority like a bank, something has to decide who gets to write the ledger, and it must be costly enough that not just anyone can. Forcing real spending on electricity and hardware makes tampering with the ledger cost more than it pays, so the expense itself is the security. This design is called proof of work.

Bitcoin halves its mining reward roughly every four years, so the supply of new coins keeps shrinking toward a fixed cap of 21 million. As the block reward falls, the design expects transaction fees to make up a growing share of miner income.

The practical problems are real. Competition made mining on a personal computer effectively impossible, and the field consolidated around large operations with specialized hardware and cheap power. Because the electricity use invites comparison to entire countries, some blockchains, notably Ethereum, moved away from mining to proof of stake.