How Coin Mining Works

Unlike paper currency, in which a government decides when and how much to distribute, digital coin is not controlled or monitored by the government. Coin miners utilize specialized software to mine digital currency.

All confirmed transactions at the beginning of a coin’s creation are stored in a public ledger. The identities of the coin’s owners are encrypted and the system uses other cryptographic techniques to ensure the legitimacy of record keeping. The ledger ensures that corresponding digital wallets can calculate an accurate spendable balance.

Also, New transactions can be verified to ensure that each transaction uses only coins that are currently owned by the spender. Mining is the process of confirming these transactions and adding them to a public ledger. In order to add a transaction to a ledger, the miner must solve an increasingly-complex computational problem (sort of like a mathematical puzzle).

Mining is open source, meaning anyone can confirm the transaction. The first miner to solve the computational puzzle adds a “block” of transactions to the ledger. The way that transactions, blocks, and the public blockchain ledge work together ensures that no one individual can easily add or change a block at will. Once a block is added to the ledger, all correlating transactions are permanent and a small transaction fee is added to the miner’s waller along with the newly created coin.