There are many ways of acquiring cryptocurrency. Some acquire through buying, some by earning and some via mining. The question then comes, "what is cryptocurrency mining?" There are many answers to this but all postulators agree on the same thing. Let me start by telling us what the conventional mining means. Like in the case of gold, mining is the process of producing or extracting gold from its ore that is, from the soil/ ground.
Similarly, cryptocurrency mining is the process of creating/gaining cryptocurrencies by solving a series of computational puzzles or cryptographic equations using computers. So, basically, mining is the process of manufacturing, creating and/or bringing something into existence. In the case of bitcoin mining, it entails minting/creating new bitcoins. Bitcoin mining is necessary to maintain the ledger of transactions upon which bitcoin is based and people who mine cryptocurrencies are called "Miners".
Cryptocurrency mining has only been around since Bitcoin was first mined in 2009. Note that, cryptocurrency mining is only being performed by high-powered computers that have the capacity to solve complex computational mathematical problems. Therefore, cryptocurrency mining involves different computer hardwares and this makes the process quite expensive. Before you even think of mining then think of these hardwares first and foremost. Because of the expensive nature of cryptocurrency mining, Miners are usually being rewarded for their work.
The process of cryptocurrency mining are as follows:
verifying transactions: Crypto mining begins from a transaction. A transaction could Mr. A transferring bitcoin to Mr. B. Now, for a transaction to be added to a block or to be successful, it has to be verified so as to avoid the issue of double-spending. This verification is done by nodes; Nodes are the individuals and devices that exist within the blockchain (such as your computer and the computers of other cryptocurrency miners).
separate transactions are then added to a list of other transactions to form a "block". Note that, blocks are the individual sections that compromise each overall blockchain and each block contains a list of completed transactions.
Once enough transactions are added to the block, a "Hash" and other types of data are added to the unconfirmed block.
Miners then verify the block’s hash to ensure the block is legitimate.
Once the block is being confirmed through mathematical computations, it then gets published in the blockchain. This means that the transfer from Mr. A to Mr. B is successful.
However, it does not look as easy as it appears, cryptocurrency Miners tend to face some difficulties and challenges in the process of mining. A few of challenges faced by Miners are:
electricity costs: to run these complex computer softwares, a lot of electricity is required. So, if a miner happens to stage is mining point in an area where there is no free electric, he has to spend money to afford electricity.
computational power: as a miner, you need a high computational power to compete with other miners. Remember, in the case of bitcoin which uses proof of work (pow), rewards are given to who provides solution to a problem first. If your computational power is then low, you may hardly get rewarded.
Because of the issue of low computational power, a few miners have decided to join forces together and this is referred to as mining pool.
Mining difficulty of a particular cryptocurrency entails how difficult and time-consuming it is to find the right hash for each block. More so, it is the level of difficulty of solving mathematical problem or cryptographic puzzle. As Miners emerge in the network, mining difficulty increases and rewards reduces as well.
In conclusion, cryptocurrency mining doesn't have too many participants as compared to cryptocurrency trading itself. This is so because mining is more resource-intensive and highly expensive. Of recent, we have seen the reduction in mining rewards as well. On the other hand, Hive Engine tokens like CTPM, LEOM/LOEMM have afforded us a new way of mining cryptocurrency. All you need do is purchase some miners and stake them on Hive engine or leodex.
Posted Using LeoFinance Beta