In the context of ablockchain based ecosystem, “mining” describes a process where a distributed network of independent actors achieve shared consensus on the state of transactions on the blockchain. The process of mining is generally used in reference to a type of distributed consensus mechanism called “Proof of Work”, which was originally introduced in the Bitcoin blockchain and emulated to varying degrees by some other blockchain based projects.
During the mining process, each distributed node (or group of nodes within a mining pool) runs the same software on their individual hardware systems and competes to solve cryptographic puzzles. Winning a cryptographic puzzle involves trial and error repeatedly until a match is found, and so the probability of winning usually correlates to the amount of computing power the node has to execute this trial and error. When a puzzle is solved, the node that solved it has won the right to transmit the most recent state of the ecosystem, or “block”, to the rest of the network. All nodes update their current state, thus forming a “blockchain”, and the process begins again.
When a node solves this puzzle, they also usually receive a reward in the form of a certain amount of cryptoasset, which is automatically sent to their pre-defined wallet address, thus incentivizing nodes to participate in this “mining” process in the first place. Therefore, “mining” can be thought of as the process of expending computing power or work, in the attempt to convert that energy into a cryptoasset.