Mining

Mining is the process in which network participants spend computing power and electricity to confirm a new batch of transactions and add it to the distributed ledger. Whoever first finds a valid solution to a cryptographic puzzle records the block and collects the reward: the newly issued units and the fees paid by senders. Two tasks are solved at once in this way — the issuance of new digital currency and the protection of the transaction history against being rewritten.

How the competition works

The puzzle is designed so that the solution cannot be calculated in advance — it has to be found by brute force. The greater the total power of the network, the faster the answer is found, so the protocol periodically recalculates the difficulty: when power grows, the search becomes harder, and when equipment leaves the network, it becomes easier. The average interval between blocks stays roughly constant regardless of how many machines are connected.

A miner's economics come down to the difference between the value of what is mined and the cost of electricity, equipment and its wear and tear. In most protocols the block reward declines on a set schedule, so over time the share of fees in a miner's income grows. Solo mining pays off rarely and unpredictably, which is why computing power is combined into pools and the payouts are split in proportion to each contribution.

An example from the platform's data

Not every digital currency is mined: some networks use other ways of confirming blocks, where no computational race is needed. The division is visible in the largest currencies on the market — they have different issuance mechanisms and, accordingly, mining plays a different role in each.

Where the term is misleading

Mining is often seen as a way to "buy below the market". It is not: mining is a production activity with its own costs, not a trade. The same currency can be bought on a crypto exchange or through an intermediary, and for a non-qualified investor the annual ceiling on such purchases through a single intermediary is limited — RUB 300,000; this threshold has nothing to do with mined coins.

The second confusion is mixing up mining with the issuance of a digital financial asset. A digital financial asset is issued by a specific party in an information system run by an information system operator, and it is backed by the issuer's obligation. A mined unit of digital currency is nobody's obligation — there is no party against whom a claim can be brought. Finally, network power and the currency's price are not directly linked: rising difficulty means an inflow of equipment, not guaranteed demand for the currency itself.