Cryptocurrency being decentralized medium of exchange, there is no central authority that issues it. Hence its creation is very different from the production of regular money. They are generated through a process called mining. Except the similarity of purpose or intention to unearth something, cryptocurrency mining is radically different from the general mining that we know.
Let’s first get acquainted with blockchain which is the core of cryptocurrencies. Blockchain is the supporting technology behind cryptocurrencies. In its form it is similar to a ledger that is used for bookkeeping.
More specifically it is a distributed, public and decentralized digital ledger that permanently records all the transactions relating to a particular cryptocurrency.
These transactions are bundled into what are called “blocks”. These are then verified by the nodes to ensure they are legitimate, by cryptocurrency miners.
This ensures whether the same coin hasn’t been expended any time prior to the transaction, and that the input and output expenses tally.
As there is no central authority or central bank, network nodes that carry out this task are called’miners’.
Every time a group of transactions are decked into a block, this is appended to the blockchain. Whoever appends the block gets rewarded with some pre decided amount of that cryptocurrency.
To prevent the devaluation of the currency by miners building lots of blocks, the task by default gradually becomes harder to conduct. The miners solve complicated mathematical problems.
In process of successfully creating a block, is accompanied by a cryptographic hash that fulfil certain requirements. The only feasible way to arrive at a hash matching the correct criteria is to simply calculate as many puzzles as possible and wait until you get a matching hash.
When the right hash is found, a new block is formed and the miner that unearthed it is rewarded with units of cryptocurrency.
In practice, this means that miners are competing against each other to calculate as many hashes as possible, with hopes of becoming the first one to hit the correct one, form a block and get their cryptocurrency payout.