Cryptocurrency Mining: Learning the Basics
The cryptocurrency market is growing at a rapid pace and the industry is filled with both newbies and professionals. In this blog, we will help you understand what cryptocurrency mining is, how it works and why it is so important to the crypto community. We can also answer some of your basic questions about the subject.
So, let’s start with the basics. What is Cryptocurrency Mining?
Cryptocurrency mining is a process that helps in confirming transactions on blockchain networks and adding them to the ledger. It also involves generating new coins. This process requires a lot of computing power which needs to be provided by miners who are willing to run their systems 24/7 for this purpose. It can take hours or even days to complete each transaction depending on how much computing power you are willing to provide. The more computing power you provide, the quicker these transactions will be completed by your system.
In this post we will cover the basics of Bitcoin and cryptocurrency mining. If you are new to the world of cryptocurrencies, mining can be a little confusing.
So what is mining?
In simple terms, mining is when you lend your computer or server’s computing power to other people or businesses that need it. In exchange for contributing your computing power, you are awarded new crypto coins (or fractions of coins).
When a cryptocurrency transaction is made it is broadcast to a network of computers called nodes. These nodes then verify that the transaction is legitimate by solving complex equations. It is these transactions that are bundled together into blocks and added to the blockchain. This process is called “mining” because just like minerals in the ground, there is a limited supply of cryptocurrencies and it takes work to extract them from their source.
Digital currencies have been a hot topic for several years now, but few people know that you can actually make money mining cryptocurrencies. At its very essence, crypto coin mining is a process in which a machine performs certain tasks to obtain a little bit of currency.
In this article we will cover everything you need to know about cryptocurrency mining: what it is, how it works and how you can earn coins by using your computer or special hardware.
Cryptocurrency mining is a process by which new coins are introduced into the existing circulating supply, as well as a process used to secure the network the coin operates on. The people who mine a coin, are known as miners. Therefore, instead of having a central authority that controls and secures the money supply, this control and security is spread out across the network that miners help to maintain.
For each blockchain, there is an incentive for one person to add a new block to the chain. For example on Bitcoin blockchain this reward is 12.5 Bitcoins (as of August 2017) and on Ethereum it’s 5 Ethers. This reward is given to whichever miner adds a block of transactions to the blockchain.
The rules of the protocol and the cryptography used for Bitcoin are still working years after its inception, which is a good indication that the concept is well designed. However, security flaws have been found and fixed over time in various software implementations. Like any other form of software,
the security of Bitcoin software depends on the speed with which problems are found and fixed. The more such issues are discovered, the more Bitcoin is gaining maturity. There are often misconceptions about thefts and security breaches that happened on diverse exchanges and businesses. Although these events are unfortunate, none of
Cryptocurrency mining is painstaking, costly, and only sporadically rewarding. Nonetheless, mining has a magnetic draw for many investors interested in cryptocurrency. This may be because entrepreneurial types see mining as pennies from heaven, like California gold prospectors in 1849. And if you are technologically inclined, why not do it?
However, before you invest the time and equipment, read this explainer to see whether mining is really for you. We will focus primarily on Bitcoin (throughout, we’ll use “Bitcoin” when referring to the network or the cryptocurrency as a concept, and “bitcoin” when we’re referring to a quantity of individual tokens).
The primary draw for many mining is the prospect of being rewarded with useful bitcoin while helping to support the network. Miners can also generate new bitcoins by using special software to solve cryptographic problems. This provides a smart way to issue the currency and also provides an incentive for people to mine.
To understand how crypto mining works, it helps to understand how cryptocurrencies work in general. Cryptocurrencies are digital assets designed to work as mediums of exchange using cryptography to securely facilitate transactions. The technology behind most cryptocurrencies uses a decentralized ledger of all transactions known as a blockchain (more about that later).
The first thing you need to know about mining, is that currently, mining power is processed using your graphic’s card (GPU). The days of mining with your CPU only are long gone. GPU offer a much faster way of solving the algorithms required to generate your coins.
There is no ‘extra credit’ for Friend B, even though B’s answer was closer to the target answer of 100, because Friend A’s answer was more precise.
Now imagine that you have a friend who works at a casino, and he is offered free drinks while gambling. He chooses to take advantage of this offer, and allows himself to become inebriated. While drunk at the casino, he makes several bad decisions: he bets on red when it is statistically more likely to land on black; he also doubles his bets after every loss, so that in case he does hit red and recoups his losses, he’ll be in the black overall. These bad decisions cost him $100 over just a few hours of gambling at the casino. If he had instead chosen not to drink and kept his bets small, making conservative choices about which games to play, he could have walked away from the casino with a small profit instead of a loss. This example illustrates why it’s