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Because bitcoin is an invisible currency with no central bank or government to regulate it, bitcoin users put their faith in a complex system of decentralized oversight called mining.

Anyone can join to workforce of miners, who use mathematical equations to verify individual transactions -- ensuring, in effect, that no one tries to spend the same bitcoin more than once. After a transaction has checked out, miners translate it into a short, unique code and bundle it with hundreds of other transactions into a block. A long chain of these blocks, known as -- you guessed it -- the blockchain, acts as a kind of public ledger that anyone in the network can access, like a crowd-sourced regulatory structure.

The mining community is not expected to do this labor without incentive, of course. For every block of transactions verified, the miner receives the transaction fees paid by the customer, as well as a set amount of freshly minted coins.

But before you run for a pencil and paper, you should know that bitcoin mining isn't exactly high school algebra. You'll at least need an application-specific integrated circuit (ASIC) that plugs into your computer to get going. (Lose you yet?) This can come in the form of a hundred-dollar USB device that can make a penny a day (or less) or a heavier processor that will cost about a grand and mine about half a bitcoin per month. Big mining farms, which can rake in millions of dollars a month, use massive networks of cooled machines and can compute thousands of trillions of calculations per second. So if you've got seed funding to spare and a boatload of cheap electricity, then by all means, go forth and mine.

- Julia Black
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