Mining can simply be described as verifying and securing transactions on the Ethereum Blockchain.
It is the miners, located throughout the world, who provide the physical and digital infrastructure of the blockchain. By using their computing power to solve automatically generated algorithms whenever a transaction is sent to the network, these decentralized and largely anonymous miners verify transactions and add them to the blockchain. For this service, they are awarded a set number of whichever cryptocurrency they are mining.
Today, Ethereum’s mining process is similar to Bitcoin’s. For each block of transactions, miners use computers to repeatedly and very quickly guess answers to a puzzle until one of them wins. More specifically, the miners will run the block’s unique header metadata (including timestamp and software version) through a hash function (which will return a fixed-length, scrambled string of numbers and letter that looks random), only changing the ‘nonce value’, which impacts the resulting hash value.
If the miner finds a hash that matches the current target, the miner will be awarded ether and broadcast the block across the network for each node to validate and add to their own copy of the ledger. If miner B finds the hash, miner A will stop work on the current block and repeat the process for the next block.
It’s difficult for miners to cheat at this game. There’s no way to fake this work and come away with the correct puzzle answer. That’s why the puzzle-solving method is called ‘proof-of-work’. On the other hand, it takes almost no time for others to verify that the hash value is correct, which is exactly what each node does.
Approximately every 12-15 seconds, a miner finds a block. If miners start to solve the puzzles more quickly or slowly than this, the algorithm automatically readjusts the difficulty of the problem so the miners spring back to roughly the 12-second solution time.
The miners randomly earn these ether, and their profitability depends on luck and the amount of computing power they devote to it.
The specific proof-of-work algorithm that Ethereum uses is called ‘ethash’, which is designed to require more memory to make it harder to mine using expensive ASICs – specialized mining chips that are now the only profitable way of mining bitcoin.