Before we deep dive into the world of cryptocurrency Let’s have a look at what exactly is cryptocurrency?
What is cryptocurrency?
A cryptocurrency is a form of currency or money that can be exchanged online for goods and services by paying real money. It can also be called an asset. Many companies have issued their own currencies, often called tokens and coins.
Cryptocurrencies can be traded specifically for the goods or services that the company provides. You’ll need to exchange real currency for buying cryptocurrency to access the good or service. Cryptocurrencies work using a technology called a Blockchain. Blockchain is a decentralized technology that spread across many computers over a network that manages and records transactions.
What is crypto mining?
It is a process of creating new crypto coins by solving complex mathematical equations to guess a hash code of a block from a blockchain network. When a person buys cryptocurrency, the transaction details are entered on a distributed ledger, called the blockchain, But this process completes only after the transaction is verified by the miners as legitimate. Once verified, the transaction is locked onto the blockchain and everyone can see that the transaction is verified and completed successfully.
It is also the way that new transactions are confirmed by the network and a critical component of the maintenance and development of the blockchain ledger. Crypto Mining is done using specific hardware which should be powerful enough to solve an extremely complex computational math problem of Blockchain.
Now from all the computers in the world, the first computer to solve the problem will be awarded the next block of bitcoin, and the process will repeat for the next block of Blockchain.
Why is Crypto Mining done? Why do people mine cryptocurrencies?
By mining, people hope to earn cryptocurrency without paying for it.
Bitcoin miners receive Bitcoin as a reward for completing “blocks” of verified transactions, which are added to the blockchain one by one. The miner who discovers the solution first gets the reward and the probability of getting the reward is related to the portion of the total mining power on the network.
What is crypto mining necessary?
Let’s take the example of a popular cryptocurrency Bitcoin
Now you know that Cryptocurrency mining helps Miners to earn and support the ecosystem but Mining of cryptocurrency serves another or the most vital purpose as for example if you know that aside from the coins minted via the genesis block (the very first block, which was created by founder Satoshi Nakamoto), every single one of those bitcoins came into existence because of miners. In the absence of miners, there would not be any additional bitcoins.
How can someone mine cryptocurrency?
You can mine cryptocurrencies with a CPU and special software designed to solve complicated, cryptographic mathematical equations. In the technology’s early days, cryptocurrencies like Bitcoin could be mined with a simple CPU chip.
The course of time, the power of CPU chips is not sufficient alone to mine most cryptocurrencies due to the increasing difficulty levels of hash. Nowadays, you need a specialized GPU or an ASIC ( application-specific integrated circuit) miners connection. Your system must be connected to an internet connection and you should be a member of an online crypto mining pool as well.
How Crypto Mining actually works?
These are the processes that happen in the whole Crypto Mining process :-
1. Nodes: The cryptocurrency blockchain is built on the basis of transactions in a cryptocurrency in which the miners help to verify the transactions.
2. Now many transactions happen daily and all these separate transactions are added to a List of other transactions to form a block in the blockchain.
Now the next step in the cryptocurrency mining process is to bundle together all these transactions into a list which will then be added to a new, unconfirmed block of data onto the blockchain.
By adding their transaction to the blockchain and completing the verification of the transaction, it prevents “double spending” of any cryptocurrencies as when a block is confirmed onto the blockchain, it is maintained on a public ledger record that is available to the public view.
A block in a blockchain is immutable and cannot be altered.
3. When that unconfirmed block is added to the blockchain, A Hash and other types of data are added to the unconfirmed block.
Now once enough transactions are added to the block to complete it, additional info like the header data and hash code from the previous block and a new hash code for the newly created block.
the header of the most recent block and the current block are combined and a new hash is generated.
This hash is added to the unconfirmed block and will need to be verified by a miner node.
In this case, let’s imagine if you are lucky enough to be the one to solve it.
4. Miners verify the hash to ensure if the transaction is legit.
In this step of the process, all miners in the network check the validity of the unconfirmed block by checking the hash.
5. Once the block is confirmed it gets published in the Blockchain, this is the time for celebration because the proof of work (PoW) is now complete. This is the time-consuming process of solving the hash and proving to others that it is done legitimately that can be verified.
Who Updates the Blockchain?
By now, you know that there’s no centralized authority to manage, regulate or control crypto exchanges, which means that the computers that mine that specific type of cryptocurrency are all responsible for keeping the ledger updated which is done very frequently.
Like for example, Buybitcoinworldwide.com estimates that a block is gained every 10 minutes through the mining process on the blockchain.