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Bitcoin Mining is the process of adding new transactions to the Bitcoin public ledger of transactions. This public ledger is often referred to as the Blockchain. The blockchain confirms to the rest of the network that a transaction has taken place and that it is valid.
Bitcoin mining serves two primary purposes. It confirms transactions and generates new Bitcoin in a block reward. When blocks are full with confirmed transactions that are valid, new Bitcoins are rewarded along the determined distribution schedule. Miners are rewarded with new Bitcoin for keeping the network secure and honest. The nature of incentives is such that the public ledger and blockchain remains open and decentralized.
Bitcoin mining uses Proof of Work. Proof of Work has costs which are rewarded. Those costs consist primarily of time, processing power, and energy.