You’re likely already familiar with gold mining, but what is mining for cryptocurrency? Crypto mining is how some cryptocurrencies—like Bitcoin—process transactions and mint new tokens. Mining for cryptocurrency is, by design, like digitally mining for gold.

Let’s explore the depths of this proverbial mine to help you decide whether to delve deep into the digital trenches as a crypto investor or remain safely above ground.

What is crypto mining?

Cryptocurrency mining uses specialized computing resources to add blocks to a proof-of-work (PoW) blockchain. Adding a new block to a blockchain validates and records the latest batch of transactions and simultaneously mints new digital tokens.

The process of cryptocurrency mining is the “work” in a proof-of-work blockchain. Crypto miners use vast amounts of computing power as they compete to solve a complex math puzzle. The fastest miner to solve the puzzle is awarded the privilege of adding the newest block to a blockchain. They also collect transaction fees and the newly minted cryptocurrency associated with that block.

Cryptocurrency mining requires substantial computing power, which is typically measured in hashes per second—also known as a miner’s hash rate. (“Hashing” is a cryptographic function that converts variable inputs like transaction information into fixed-length strings of characters, or hashes.) Crypto miners use specialized hardware, including application-specific integrated circuits (ASICs) and graphics processing units (GPUs).

Anyone with an Internet connection and enough computing power to compete with other miners can choose to mine for cryptocurrency. Crypto mining is decentralized by nature, which supports the security of a proof-of-work blockchain.