Definition
Mining (Crypto)
Crypto mining is the process by which some blockchains validate transactions and create new coins through computational work, rewarding participants who solve cryptographic puzzles. This is informational.
Mining secures proof-of-work blockchains like Bitcoin: miners compete to solve compute-intensive puzzles, and the winner adds the next block and earns newly created coins plus transaction fees. This consumes significant electricity and specialised hardware.
Mining is one way coins enter circulation; other blockchains instead use staking (proof-of-stake), which is far less energy-intensive. In India, the cost of mining (electricity, hardware) is not deductible against VDA income except as cost of acquisition where applicable.
Mining economics depend on coin prices, difficulty and power costs, and can be unprofitable. This entry is informational only, not investment advice; crypto is high-risk.
Related terms
- BitcoinBitcoin is the first and best-known cryptocurrency, a decentralised digital asset with a capped supply, recorded on a public blockchain. In India it is a taxed VDA. This is informational, not advice.
- Gas FeeA gas fee is the payment, in a blockchain's native token, that users pay to have their transaction processed and recorded by the network. This is informational.
- StakingStaking is locking up crypto in a proof-of-stake network to help validate transactions and, in return, earn rewards; it carries lock-up and slashing risks. This is informational, not advice.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.