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How Does Crypto Mining Work?

With all the chatter and buzz surrounding cryptocurrencies, many people have taken the first step and purchased some crypto, most likely Bitcoin. As you start to trade different cryptos and make transactions, it’s easy to start wondering how your cryptocurrency is getting from one account to the next.

Therein lies the beauty of blockchain technology: there is a decentralized group of nodes or users that support each blockchain called miners. The reason these are called crypto miners is that they serve a similar function to mining physical items like precious metals.

The concept behind mining is that the miners perform a difficult task in order to receive the particular item. For example, gold miners spend lots of time assaying potential locations and lots of money digging into the ground to find gold. And the value of the item is that there is only so much to find in the ground.

This concept applies to cryptocurrency as well. Miners are performing difficult computing tasks in order to be rewarded with the particular cryptocurrency they are supporting. But there is a lot more to crypto mining, especially if you are considering becoming a miner yourself. Here’s what you need to know:

What are the types of crypto mining?

There are two primary ways that crypto mining works: Proof-of-Work and Proof-of-Stake.

Proof-of-Work (PoW)

Proof-of-Work is a crypto mining protocol that defines an extensive mathematical computation that needs to be performed in order to create a new block for the blockchain. This is important because it makes it extremely difficult for anyone to forge a transaction, but easy to verify transactions on the blockchain.

What happens is new transactions are grouped into a ‘block,’ which miners, in turn, verify are legitimate transactions by solving the complex PoW computation. The first miner that solves the block computation is chosen and awarded a block reward for the work required. Then the confirmed block and transactions are added and stored on the public blockchain.

All miners on the network are competing to be the first one to solve the computation, which is essentially a brute force computation. So in essence, with PoW mining, the faster computer processors will have a much better chance to solve the problem first and be chosen to verify the block.

As the life of the blockchain progresses, the computations become progressively harder, and the cost of creating new blocks increases, mainly because the mining operations requires incredible amounts of electricity to support the mining hardware.

PoW was made popular as the mining method for Bitcoin’s blockchain, but it’s also used by many other blockchains.

Proof-of-Stake (PoS)

Proof-of-Stake is another way that blockchains use mining to validate transactions and support the legitimacy of the blockchain through a distributed consensus. Rather than reward miners based on their computational efforts, the miner for each new block is chosen in a deterministic way.

Under the PoS protocol, each new miner is chosen based on how much of the particular digital currency they hold, or how much ‘stake’ they have in the related crypto. In this approach, there are no block rewards and the entire digital currency supply is generated at the beginning. Miners instead receive transaction fees, making them more forgers than miners.

What are the ways you can mine cryptocurrency?


Many people have taken advantage of the new economy and ecosystem created by cryptocurrencies and started mining as a way to earn extra money. If mining cryptos has caught your attention, here are the main ways you can start mining cryptocurrency.

Bitcoin Mining App

By far the easiest way to get started on your mining journey is to download an app, or mining software, that automates the process for you. For Windows users, Bitcoin Miner is a free app, or mining software, to use on Windows 10 PCs, tablets, and phones. After downloading the app, users go to the settings and enter their Bitcoin wallet address in the Payout Address, then press the ‘Start’ button and you’re off to the races.

With the Bitcoin Miner app, you will be able to process more transactions the more powerful your device is. So your Windows phone might not mine as much Bitcoin as your Windows PC that has more processing power.

Cloud Mining

Another pretty easy way to get exposure to cryptocurrency mining is to use a cloud mining service and have a third-party do all the heavy lifting for you. For example, Genesis Mining allows users to sign up and pay for cryptocurrency mining services. The more you invest in the service, the more crypto your account will be able to mine. They offer mining for Bitcoin, Litecoin, Ethereum, Monero, and several other cryptos.

To get set up with cloud mining services, you often have to sign a contract that’s typically a one-year minimum. Again, mined crypto is sent to the wallet address you enter, and you should expect to see your share of the mine on a weekly, monthly, or even daily basis.

Build a Mining Rig

Those looking to get into the weeds with cryptocurrency mining will need to invest in some heavy-duty hardware called a mining rig. Mining rigs are application-specific integrated circuit (ASIC) processors designed for crypto mining and constantly run every day all day.

ASIC miners are a considerable investment and often start selling for two to three thousand dollars. On top of the upfront hardware costs, operating the rig requires tons of electricity and can be quite expensive. It can take a beginning miner about a year of nonstop mining to start turning a profit on their operations.

Antminers are the most popular choice, made by Bitmain. They provide users with support and comprehensive guides to help both beginners and advanced miners get their hardware up and running. With the new craze in cryptocurrencies, they are also releasing newer models designed to be more efficient at mining and consuming less energy.

Miners using ASIC hardware will want to download good mining software and join a mining pool when mining gets going. Your software tells the hardware which crypto to mine, and to whom send the mined crypto. The mining pool is a group of miners that combine their processing power to give themselves a better chance at becoming a block creator and receiving a block reward or transaction fee. Then rewards are allocated accordingly among the mining pool members.

Slush Pool and CGminer are two of the commonly recommended mining pools to start with, along with the pool supported by Bitmain.

Pros & Cons of Mining Cryptocurrency

Along with deciding which cryptocurrencies to invest in, choosing whether or not to mine is another investment decision that crypto enthusiasts face. When considering crypto mining, take note of the pros and cons:


Mining crypto can be a neat way to earn extra money through your computer’s processing power. It could also be another unique way to support your favorite crypto that you’ve invested in. The network of miners support the Blockchains, so having more miners can help lead to a more stable and faster coin.


Mining is a real investment and consumes money and resources on an ongoing basis. Depending on the level of mining you are considering, it could be a large upfront cost with a year time frame to recoup your costs. There is always the chance that your mining rig malfunctions at some point and requires you to make fixes. If you dive into the world of mining, you could end up spending more time and money than you originally anticipated.

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