7 min reading
Did you know how crypto is generated? Let's explore all the details about mining.
what is mining?
With the growth of the cryptocurrency market, many new notions appear. It also triggers the new influx of crypto enthusiasts, who want to take the chances and conquer the cryptocurrency market. There are various possibilities to receive cryptos, such as to buy, exchange, or mine. In the article, we are going to talk about mining cryptocurrency, how to do it and what are its advantages.
What is mining?
To begin with the notion of cryptocurrency mining. Mining is the process of new blocks generating with the help of computing facilities. The mining process has certain functions and tasks for the performer: the computer solves complex mathematical problems and has a reward with digital coins. To ensure the high transaction speed and the stable functioning of the p2p network, large computing power is required.
Cryptocurrency mining is one of the key factors that allow cryptocurrencies to operate as a decentralized network and do not attract third-party institutions. When mining takes place, all transactions between users are verified by miners. A miner is a node on a network that collects transactions and combines them into blocks. When transactions are made, the miner adds them to the memory pool and starts collecting multiple transactions into a block.
Also, they add records about each particular transaction to the public blockchain ledger and add new coins into existing circulation.
We can explain in details the mining process as following:
- The crypto mining software platform compiles the latest crypto transactions into blocks and confirms their validity. Multiply mathematical problems of different complexity are being solved simultaneously.
- The reaching of the right answer or consensus is the main goal, that provides the system functioning.
- Bitcoin (or any other cryptocurrency) is generated as a result of mining processes. There is also a limit of coins for bitcoin of 21 million as the bitcoin developer has set it to the coding algorithm.
Functions of mining
The main function of mining is the software service of cryptocurrency transactions. Miners can process transactions single, or in groups, that are also called miner’s pools. It is a complicated task to mine cryptocurrency alone, as the work requires sufficient computing power.
How to get profit from mining?
Therefore, miners are united into pools or farms. As a result, profit for the person decreases, but at the same time, the possibility to find the correct transaction solution increases. Nowadays, there are many large mining farms operating on the network, mining bitcoin, and other crypto-assets. ASIC miners are used as mining equipment, for today it is the most powerful computer technology of a new generation that was created especially for the extraction of cryptocurrency. The miner who first gets the valid hash gets a block reward, but the probability to find the hash depends on the total network mining capacity. Thus those miners, who have small mining and computing powers have fewer chances to find the hash and get the reward for the mined block.
All about mining pools
Mining pools are created in order to solve this problem. Thus, several miners share their computing power of the network. If we speak about the reward, then it is divided equally among all pool participants. But the reward depends also on the number of resources from the part of all miners and how much they had done in order to find the hash.
However, mining is a very interesting social phenomenon. Most probably in the future it will be possible to mine not only keys for blocks, but also to do other, more complex and necessary things. The crypto industry is evolving every day, so stay tuned so you don’t miss anything.