Mining, in the crypto context, is the process of verifying transactions and then cataloging them as a new block of data on a blockchain. It’s one way to conduct a basic accounting function on an open, distributed digital ledger.
In the case of Bitcoin mining new transactions are added to the ledger every ten minutes.
Crypto mining is a component of the proof-of-work consensus mechanism — or a way to use intense computation to verify transactions without the need for a centralized corporation or official.
Proof-of-work mining is typically measured by hash rate, or the amount of computing power that miners have to dedicate for a chance to successfully find the right combination of cryptographic hashes to create a new block.
The reason miners are willing to dedicate computing power to the network is because if they successfully confirm a block of transactions first then they earn a block reward.
The block reward also plays a part in getting new cryptocurrency into circulation, and for creating scarcity of the currency. Using bitcoin as an example: there will only ever be 21 million bitcoin produced.
Every four years the block reward gets cut in half, reducing the amount of new currency in circulation and making it harder to get — presumably while demand continues to rise over time. This makes currencies following this model deflationary, meaning there is less available over time
So, in a way, mining fulfills both a network maintenance function (decentralized consensus) and an economic function (controlling issuance of new currency).
Miners are one form node required to create a secure, decentralized network. Other network nodes, also known as full nodes, maintain complete records of all of a blockchain’s activity.