Cryptocurrency trading platform Coinbase has made global headlines after soaring in value on the back of its stock market debut on Wednesday.
Co-founder Brian Armstrong told CNBC he hoped the event would be seen as “a landmark moment for the crypto space.”
Coinbase shares closed at $328 after its first day of trading, giving the company a valuation of more than $85 billion.
The news has spurred an increased interest in digital currency, and more specifically in what it means to mine cryptocurrency, as Google search data shows.
In the most basic terms, cryptocurrency mining means using a computer to create new cryptocurrency coins, such as bitcoin.
To mine bitcoin, one needs to download the free bitcoin software. It very quickly gets complicated after that.
What actually happens during bitcoin mining is that a computer performs mathematical calculations to solve number puzzles.
By solving these puzzles, the computer helps keep the entire Bitcoin network up and running because the answer produces what is known as a “block” to be added to the “blockchain,” or Bitcoin network.
These blocks contain updates on what is happening on the network, including bitcoin transactions.
On average, it takes computers around 10 minutes to process a block, and when a computer successfully does so, the user is currently rewarded with 6.25 bitcoins—worth around $387,500 at the moment.
Multiple computers can mine a block at the same time, meaning the reward is shared out. Users with the most powerful computers contribute the most effort, so their rewards tend to be highest.
This leads to heated competition, and today, professional miners are using enormous, expensive, and very powerful computers known as “rigs” to get the biggest reward share they can.
Some miners have operations so substantial that they consist of tens of thousands of computers. Machines designed specifically to mine cryptocurrency are called ASICs (application-specific integrated circuit).
In contrast, someone could use their personal laptop to mine, but the process would be extremely slow and it could even cause the laptop to overheat in a matter of hours.
To solve this, some have resorted to cloud mining, in which they pay someone else for virtual access to their bigger mining rig—usually in a big facility. Paid cloud mining can cost hundreds or thousands of dollars.
All of this—the mining process and the mathematical equations—was purposefully designed into bitcoin’s code when the software was released back in 2009 by an anonymous person, or group of people, known as Satoshi Nakamoto.
Other cryptocurrency types such as Ethereum can also be mined but the process is slightly different.
Over the years cryptocurrency mining has been criticized for its increasingly heavy electricity usage and subsequent toll on the environment.
According to analysis by Cambridge University, bitcoin mining uses around 121.36 terawatt-hours of electricity a year—more than the entire country of Argentina and nearly as much as Norway.