Mining

Publication date: 14 Apr 2023

Mining is the process by which networks of specialized computers generate and release new bitcoins (and other cryptocurrencies) as well as verify new transactions.

In other words, mining is the mechanism by which many people around the world participate in maintaining cryptocurrency networks. It involves vast decentralized networks of computers around the world that check and protect blockchains – something like virtual ledgers that document cryptocurrency transactions. In return for providing their computing power, the computers on the network are rewarded with new coins. It’s a virtuous circle: miners maintain and protect the blockchain, the blockchain awards coins, the coins provide an incentive for miners to maintain the blockchain.

How does crypto mining work?

Currently, mining is done by specialized firms or groups of people combining their resources.

The calculations required to validate and record each new crypto transaction, as well as to secure the blockchain, are performed by specialized computers. Blockchain requires a lot of computing power for verification.

Companies buy the mining equipment and pay for the electricity that keeps it running. The value of the coins mined must be greater than the cost of mining those coins for this to be profitable. Find out more about what the traffic for cloud mining is.

In Japan, Singapore, Belarus, Germany, Estonia and other countries, cryptocurrency is legally regulated and is a legitimate payment method. Cryptocurrency exchanges are legal in the US, Japan and Malta.

Many countries have bans on crypto transactions. For example, the People’s Bank of China announced a total ban on all cryptocurrency transactions in autumn 2021. An outright ban on the use of cryptocurrencies as a means of payment is also in place in Bangladesh, Vietnam, Egypt, UAE and Turkey.

In Russia, the use of cryptocurrencies as payment for goods or services is prohibited under Law No. 259-FZ on Digital Financial Assets, Digital Currency and on Amendments to Certain Legislative Acts of the Russian Federation. In addition to prohibiting the use of CFA and SCM when paying for goods and services, the document obliges CFA exchange operators to refuse transactions where it is possible to use such assets as a money surrogate.