What is Cryptocurrency Mining and How Does It Work? A Complete Guide for Beginners

Cryptocurrency mining is the process of using computers to solve complex mathematical problems and verify transactions on a decentralized network.

This allows the miners to earn rewards in the form of new coins or fees. Sounds harmless, right?


Cryptocurrency mining is actually one of the most environmentally damaging activities in the world. It consumes enormous amounts of electricity, emits huge amounts of greenhouse gases, and generates tons of electronic waste.

In this article, we will explain how cryptocurrency mining works, why it is so harmful, and what we can do to stop it.

How Cryptocurrency Mining Works

Cryptocurrency mining is based on the concept of proof-of-work (PoW), which is a way of ensuring that the transactions on the network are valid and secure.

PoW requires the miners to solve a difficult puzzle, called a hash, that is linked to the previous block of transactions.

The hash is a string of numbers and letters that has a certain property: it must start with a certain number of zeros.

The only way to find a valid hash is to try different combinations of inputs, called nonce, until one produces the desired output.

This is a very time-consuming and energy-intensive process, as the difficulty of the puzzle increases with the number of transactions and the number of miners on the network.

The first miner who finds a valid hash gets to add a new block of transactions to the network and receives a reward in the form of new coins or fees.

The hash also serves as a digital signature that verifies the authenticity and integrity of the block.

Any attempt to tamper with the block or the transactions would change the hash and invalidate the block.

This makes the network resistant to fraud and censorship, as no one can alter the history of transactions without the consensus of the majority of the miners.

Here is the general steps involved in cryptocurrency mining.

Why Cryptocurrency Mining is Harmful

Cryptocurrency mining is harmful for several reasons:

1. It consumes a lot of electricity.

According to a recent study by Cambridge University, the annual electricity consumption of Bitcoin mining alone is estimated to be around 121 terawatt-hours (TWh), which is more than the entire consumption of countries like Argentina, Norway, or the Netherlands.

This electricity is mostly generated from fossil fuels, such as coal, oil, and gas, which contribute to global warming and air pollution.

2. It emits a lot of greenhouse gases.

According to another study by Digiconomist, the carbon footprint of Bitcoin mining is around 36.95 megatons (Mt) of CO2 per year, which is equivalent to the emissions of countries like New Zealand, Denmark, or Ireland.

This adds to the already alarming levels of greenhouse gases in the atmosphere, which cause climate change and extreme weather events.

3. It generates a lot of electronic waste.

According to the same study by Digiconomist, the electronic waste generated by Bitcoin mining is around 10.71 kilotons (kt) of e-waste per year, which is comparable to the e-waste produced by countries like Luxembourg, Estonia, or Cyprus.

This e-waste consists of obsolete or damaged mining equipment, such as computers, chips, fans, and cables, which contain toxic materials and metals that can harm the environment and human health.

How to Stop Environmental risks of Cryptocurrency Mining.

Cryptocurrency mining is not only a threat to the environment, but also to the security and stability of the network.

As the mining difficulty increases, the miners have to invest more in hardware and electricity, which creates a barrier to entry and a concentration of power among a few large players.

This reduces the decentralization and diversity of the network, making it more vulnerable to attacks, manipulation, or regulation.

There are several possible solutions to mitigate or eliminate the negative impacts of cryptocurrency mining, such as:

  • Switching to alternative consensus mechanisms, such as proof-of-stake (PoS), proof-of-authority (PoA), or proof-of-space (PoSpace), which do not require intensive computation and energy consumption, but rely on other factors, such as stake, reputation, or storage capacity, to validate transactions and secure the network.
  • Implementing layer-2 solutions, such as lightning network, plasma, or state channels, which allow transactions to be processed off-chain, in a faster and cheaper way, and only use the main chain for final settlement and dispute resolution.
  • Adopting green energy sources, such as solar, wind, or hydro, to power the mining operations, reducing the carbon footprint and the dependence on fossil fuels.
  • Recycling or repurposing the mining equipment, reducing the e-waste and extending the lifespan of the hardware.


Cryptocurrency mining is a fascinating and innovative technology that enables the creation and operation of decentralized networks.

Cryptocurrency mining is also a complex and controversial topic, with many pros and cons. However, it is clear that the current model of PoW mining is unsustainable and harmful, and needs to be reformed or replaced.

We hope that this article has helped you understand how cryptocurrency mining works, why it is so damaging, and what we can do to stop it. Thank you for reading.


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