Mining is used as a metaphor for adding new bitcoins into the bitcoin system because it requires (computational) work, just as mining gold or silver requires (physical) effort. Of course, the tokens found by miners are virtual and only exist in the digital ledger of the Bitcoin blockchain.
Why do you need to mine Bitcoin?
Since they are completely digital records, there is a risk of copying, counterfeiting, or reusing the same coin multiple times. Mining solves these problems by making it very expensive and resource-intensive to try to perform one of these operations or to “hack” the network in other ways. In fact, joining the network as a miner is more cost-effective than trying to disrupt it.
What does it mean to confirm a transaction by mining?
In addition to adding new bitcoin (BTC) into circulation, mining also plays a key role in confirming and verifying new transactions on the Bitcoin network. This is important because there is no central agency, such as a bank, court, government, or any other agency, to determine which transactions are valid and which are invalid. On the contrary, the mining process achieves a decentralized consensus through Proof of Work (PoW).
Is Bitcoin mining legal?
The legitimacy of Bitcoin mining depends completely on your geographic location. The concept of Bitcoin may threaten the dominance of fiat currencies and the government’s control of financial markets. Therefore, Bitcoin is completely illegal in some places.