In the context of cryptocurrencies, a “miner” is a computer or a network of computers that adds new transactions to the blockchain. Miners play a crucial role in most proof-of-work blockchain networks, such as Bitcoin.
Here’s a bit more about how it works:
- Transaction verification: Miners take unconfirmed transactions, validate them according to the protocol’s rules (for example, ensuring the sender has enough funds to complete the transaction), and pool them into a block.
- Proof of work: To add this new block to the blockchain, miners must solve a complex mathematical problem, often involving a significant amount of computation power. This process, known as proof of work, makes it difficult for any single entity to control the blockchain and prevents fraudulent activity.
- Block addition: The first miner to solve the problem gets the opportunity to add the new block to the blockchain, which contains the verified transactions.
- Block reward: As a reward for their work, the miner receives a specific amount of the cryptocurrency (the “block reward”) and any transaction fees from the transactions included in the block. For instance, in the case of Bitcoin, this reward halves approximately every four years in an event known as “halving.”
The process of mining involves significant computational power and electricity, making it a costly and competitive process. It’s also subject to various controversies and criticisms, particularly concerning its environmental impact due to high energy consumption.
It’s worth noting that not all cryptocurrencies use this proof-of-work system. Some use other methods like proof-of-stake, which requires users to show ownership of a certain number of tokens to propose a new block.