Cryptomining: The machine that keeps the blockchain alive

First of all: Why does cryptocurrency mining matter?

If Bitcoin or Ethereum operate without a central bank, something has to validate each transaction and prevent someone from spending the same coin twice. That something is cryptocurrency mining. Miners are like digital referees who organize, verify, and record every movement of money on the network. In return, they earn new cryptocurrencies. It's an elegant system: the network secures itself while incentivizing others to protect it.

How Cryptocurrency Mining Works in Three Simple Steps

Step 1: Transactions arrive at the waiting pool

When someone sends Bitcoin or any other crypto, the transaction is not confirmed immediately. It goes to a place called memory pool, where it waits for someone to order and verify it.

Step 2: Miners compete by solving puzzles

This is where cryptocurrency mining comes in. Miners take those pending transactions and group them into a block. They then try to solve a complex mathematical puzzle by combining data from the block with a number called nonce. The first one to find the valid solution wins.

Step 3: The block is added to the blockchain

The winning miner broadcasts their block to the entire network. Other nodes verify it and, if it is valid, add it to the blockchain. The miner receives their reward: new coins + fees from all the transactions they included.

The technical structure: Within the process of cryptocurrency mining

Hashing: Translate transactions to code

Each transaction goes through a hash function that converts it into a unique series of numbers and letters. That code acts as a digital fingerprint of the transaction. If someone tries to modify even a single number, the hash changes completely and fraud is detected.

The Merkle tree: Organize everything in hierarchy

Transaction hashes are organized in pairs and hashed together. Then these pairs are hashed against each other, repeatedly, until a single final hash called the Merkle root remains. This hash represents all the transactions of the block in a single line of code.

Find the valid hash: The race against time

Miners take the root hash of their block, combine it with the hash of the previous block, and add that arbitrary number (nonce). All of this goes through the hash function. If the result is not valid (that is, it does not meet the required difficulty), they change the nonce and try again. Thousands of times. Until they get a hash that starts with a certain number of zeros, according to what the network requires at that moment.

Propagation and confirmation: The block becomes official

When a miner finds a valid hash, they transmit it to all nodes. The network verifies it and, if everything is correct, adds it to its copy of the blockchain. All miners stop working on that block and start on the next one.

What happens when two miners win at the same time?

Occasionally, two miners find a valid hash almost simultaneously. The network temporarily splits: some nodes accept one block, others the second. The competition is resolved when someone mines a new block on top of one of the two blocks in dispute. The block that arrived first becomes the official one, and the other is discarded (, which is called an orphaned or stale block ). The miners who bet on the losing block start over.

Mining Difficulty: The Automatic Adjustment System

The network cannot allow mining to be too easy or impossible. That is why it periodically adjusts the difficulty. If many miners join and the hash power increases, the difficulty rises (the hash must start with more zeros). If miners leave, the difficulty decreases. Thus, the average time to mine a block remains constant, regardless of how much computing power is connected.

Types of cryptocurrency mining according to hardware

CPU Mining: The Beginning ( now obsolete )

In the early days of Bitcoin, anyone with a computer could mine. The CPU (central processor) had enough power. But as the network grew, the difficulty increased and this became unviable.

GPU Mining: For altcoins

Graphics Processing Units are designed to process many operations in parallel. They are more cost-effective than specialized equipment and are still used to mine some altcoins, depending on their algorithm and difficulty.

ASIC Mining: The Professional Way

Application-specific integrated circuits are machines designed solely for mining. They are incredibly efficient but very expensive. As technology advances rapidly, older models lose profitability quickly. It is the most expensive option but the most powerful for large-scale operations.

Mining Pools: Join Forces

An individual miner has microscopic odds of solving a block alone. Pools gather miners and their combined hash power. When they win, they share the reward according to the work each one contributed. This increases the odds but raises concerns about centralization.

Cloud Mining: Power Rental

Instead of buying hardware, you rent computing power from a provider. Simpler to start but with risks: scams, low profitability, or lack of real control over the operation.

Bitcoin and PoW Mining: The Most Well-Known Case

Bitcoin operates on Proof of Work, the original consensus mechanism created by Satoshi Nakamoto in 2008. PoW requires miners to spend electricity and real power to solve puzzles. This deters attackers: it is very expensive to hack the network.

Currently, a Bitcoin miner who solves a block earns 3.125 BTC in reward (a December 2024). But every 210,000 blocks (approximately every four years) the halving occurs: the reward is halved. This event is crucial for the mining economy.

Is cryptocurrency mining profitable today?

The answer is: it depends. Crypto mining can be profitable, but it requires careful calculation of multiple variables:

Cryptocurrency prices: When they rise, rewards are worth more. When they fall, profits evaporate.

Hardware Cost: ASIC machines cost tens of thousands of dollars. You need to be sure that you will recover the investment.

Electricity: The cost of energy is the most critical factor. If it is too high, expenses exceed profits. Some miners operate in countries or regions with cheaper electricity.

Obsolescence: Hardware becomes outdated quickly. New ASIC models outperform the old ones, so upgrading is frequent and expensive.

Changes in the protocol: A halving reduces earnings. Worse still: some projects change their validation mechanism (Ethereum moved from PoW to Proof of Stake in 2022, killing mining on that network).

Before investing in cryptocurrency mining, do your own research. Evaluate operating costs, hardware prices, technological upgrade speed, and market volatility.

Conclusion

Cryptomining is the heart that pumps security and the issuance of new coins to Proof of Work blockchains like Bitcoin. Without miners, there is no validation. Without validation, there is no trust in the network. Miners have real profit opportunities, but they face serious risks: high costs, aging technology, volatile prices, and unexpected changes in protocols. If you decide to enter cryptomining, do so with open eyes and realistic expectations.