Cryptocurrencies are the talked about trading instruments of the current day. Not everyone is aware of what a cryptocurrency is, or how is it traded. Basically cryptocurrencies are digital currencies that are traded digitally with complex procedures sometimes known as transactions. In the list of cryptocurrencies, Bitcoin is the most popularly and commonly known cryptocurrency. These digital virtual currencies are which cannot be seen, touched or felt. But these can be transacted using the latest and upcoming technologies.
There are many in the list of cryptocurrencies that are been traded, but the Bitcoin is the one popular name in the list of cryptocurrencies that has become the buzz of cryptocurrency instruments.
Over the past few years cryptocurrencies have been gaining popularity with the increasing number of people buying and selling and trading in cryptocurrencies. But a major fact to note about these cryptocurrencies is that there is no central authority that has a control over the production or generation of cryptocurrencies. In fact no one knows the actual value of the cryptocurrencies that exist. There are only estimated numbers that are playing around in various researches regarding the actual value of cryptocurrencies. But it is known that the cryptocurrencies will never reach an infinite level as there is a limit that is set for cryptocurrencies. There is no central authority that regulates and controls cryptocurrencies, like for printing currency, there is a central authority that governs the printing and regulates the entire process of new notes, the circulation and so on. But when it comes to cryptocurrencies, there is no such authority that can govern the production of cryptocurrencies.
Instead, these cryptocurrencies are generated through a mechanism called ‘MINING’. Yes cryptocurrency mining is the process by which new cryptocurrencies like Bitcoins come into the picture. So what is this ‘Cryptocurrency mining’? And how does cryptocurrency mining work?
Well, cryptocurrency mining is a deep rooted concept which first requires knowing the meaning of block chain technology. The block chain technology enables cryptocurrency mining process.
Block chain is the latest technology that supports all cryptocurrencies. The block chain technology can be referred to as a decentralized register for every transaction that is carried out in cryptocurrencies. Each and every transaction in cryptocurrencies are assembled in what are known as ‘blocks’ and are then verified to ensure if these are from legitimate cryptocurrency miners. The block chain technology ensures that the input and out expenses of the transaction tally in all aspects. Once, verified, the next set of sequential blocks that carry the cryptocurrency transactions are attached to it. So basically cryptocurrency mining is the process in which different cryptocurrency transactions are verified and added to the block chain digital ledger. The person who authenticates and adds the transaction to the block is known as the cryptocurrency miner or the cryptocoin miner.
Cryptocurrency mining is also popularly known as cryptocoin mining, altcoin mining, or Bitcoin mining.
The cryptocurrency mining process involves competing with other crypto-miners (people who transact in cryptocurrencies) to solve complicated mathematical problems with cryptographic hash functions that are associated with a block containing the transaction data. The cryptocurrency mining process involves compiling the recent cryptocurrency transactions and solving a computational puzzle. Cryptocurrency miners use either a GPU (graphics processing unit) miner or an application-specific integrated circuit (ASIC) miner for mining cryptocurrencies.
Every type of mining comes with a beneficial reward associated with it, as mining in itself involves deep rooted knowledge and research. Mining is a type of discovery that a man does for which he receives reward in return. So when it comes to cryptocurrency mining, the question arises is that, what is the reward of cryptocurrency miners? The amount of cryptocurrencies released with each mining transaction (a block) is known as ‘black reward’ or mining reward.
The cryptocurrency miner who tries to crack the code is rewarded by being able to authorize the transaction, and in return for the service provided, these crypto-miners earn small amounts of cryptocurrency of their own. The crypto currency miners also earn the transaction fee that is associated with mining the block. This is how new cryptocurrencies are generated. In order to be competitive with other crypto-miners, though, a cryptocurrency miner needs a computer with specialized hardware that allows cryptocurrency mining.
Basically cryptocurrency miners are working as auditors. They are verifying the previous cryptocurrency transactions, which keep the cryptocurrency transactions legitimate by avoiding the double spending problem. As we all know, cryptocurrencies are digitally operated virtual currencies that are highest prone to security threats. Hence these cryptocurrency miners are actually verifying these transactions in the block chain technology, thereby creating a more secure environment in the cryptocurrencies world. Thus these crypto-miners are rewarded with newer cryptocurrencies when they successfully mine cryptocurrencies. But, not every miner earns rewards in mining cryptocurrency transactions. Thus there is a lot of research involved in cryptocurrency mining that one has to know.
Cryptocurrency mining is a popular way to earn money is cryptocurrencies. But with more and more people getting involved in cryptocurrencies, mining crypto coins has become highly difficult. In addition to the difficulty level, cryptocurrency mining has become expensive too which not everyone can afford. Cryptocurrency mining is painstaking, expensive, yet rewarding. Nonetheless, mining has a magnetic draw for many investors interested in cryptocurrency.
There is a lot of competition in cryptocurrency mining, as there are many miners getting involved. Lots of crypto miners are competing against each other to calculate as many hashes as possible, in the hopes of getting to be the first one to hit the correct one, to be able to form a block and get their cryptocurrency payout (rewards).