What Exactly is Crypto Mining?15th September 2018
You may have heard of bitcoin, the digital currency that has been making all the headlines. But have you ever asked yourself how this currency is created.
This article is going to shade some light on that topic and introduce you to some important terminologies. If you are thinking about investing in digital currency or you are just curious about it, this article is for you.
What is Crypto Mining?
Crypto mining is the process of ‘uncovering’ crypto-currencies. In the same way that a miner has to dig the ground to discover minerals, a crypto-miner searches for digital currency by solving a series of mathematical problems.
How it Happens
Before going deep into the process, we have to familiarize ourselves with nodes – the tools used in the mining. Nodes are powerful machines used to run the digital currency software by relaying information. Although the item sounds too technical to operate, it can be used by anyone. Once you acquire the machine, you download the digital currency software, and then leave one port open to allow the node to function.
Mining nodes or miners categorize outstanding transactions into blocks and connect them to the blockchain. A blockchain is a ledger of digital transactions. However, the process of adding new transactions into the existing blockchain is complex. The miners first have to solve a mathematical problem found in the crypto-currency software.
Solving the Problem
To solve the mathematical problem, the miner has to identify a number, that when integrated with the data in the block and disseminated via a hash function, leads to a result within a specific range. Since one miner is not enough to solve the puzzle, you need a group of miners with high processing speed.
The miners guess random numbers and apply them to the hash function, which releases a series of fixed numbers. These figures are part of the mystery numbers required to solve the problem, but they are not the complete set. The miners have to continuously guess the data and pass it through the hash algorithm until they find a solution for the mathematical problem. The reward for successfully solving this puzzle is a crypto-currency.
What It All Means
So far, we have learned that the process of ‘uncovering’ crypto-currencies is very different from physical mining. Crypto mining involves adding new transactions onto an existing block chain. The person that successfully mines a new crypto-currency can use it to acquire various assets through a peer-to-peer network.
Currently, there are some people that mine for speculative rather than transaction purposes. These people successfully solve blocks to sell to willing buyers. A rise in the popularity of bitcoin has made crypto-currency mining a lucrative venture.
If you are interested in just mining instead of trading in crypto-currencies, be prepared to spend a fortune on hardware. Alternatively, you can go for cloud mining, whereby you only pay a subscription fee.
Crypto mining is the process of mining crypto-currencies using powerful computers called nodes. Depending on your machines’ processing power and the number of third party miners, it could take you either a day or a week to solve a single block.
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