Beginners Guide to Cryptocurrency Mining
Mining is one of the most fundamental concepts of cryptocurrency. This article will give you a beginners step by step guidance on the mining process.
What is cryptocurrency mining?
Crypto mining is one of the most common methods for validating transactions in a blockchain network and adding them to a long public list of transactions called the blockchain.in exchange, miners get rewarded with cryptocurrency
Another way to define it is through which new coins are added to the already existing supply. the people who mine coins are referred to as miners
Generally, crypto mining includes functions like adding transactions to the blockchain and releasing new currency.
How it all works?
Crypto mining is a validation model. There are two known models, which are proof of work or proof of stake. In this article, I will cover the proof of work validation model.
Cryptocurrencies like Bitcoin, Litecoin, and bit cash use the proof of work validation model. Here, businesses and individuals compete using their high powered computers to solve complex mathematical problems that are part of the encryption mechanism. Whoever wins the competition is rewarded by the network.
The current Block Reward for solving one block on the Bitcoin Blockchain is 12.5 BTC. This is very fair compensation for the work.
Step by step guide to cryptocurrency mining
(a)Once a transaction is made over a blockchain, it is recorded and put on a block for validation.
(b)The second step is to encrypt the block. Here, miners have to solve cryptographic puzzles to find the cryptographic hash proper for the block.
©When the block is secured, it is added to the blockchain, and other nodes do verification on the network, a process known as consensus. Here, the nodes are computers in the network. If a miner successfully verifies and secures a block, he is rewarded with the newly created coins in the process we called proof of work.
advantages of mining cryptocurrency
Here are some reasons why many people want to become miners and earn cryptocurrency.
(a)Money- in the end, it all comes down to money. Mining is very profitable if done correctly. In China, mining has replaced full-time job for many. If your country offers cheap electric power and housing and internet, you could start thinking about it.
(b)Safety- cryptocurrency cant be stolen or hacked unless you misplace your private keys. As long as your private keys are safe, your crypto is safe.
©Freedom- once you become a good miner, you can consider quitting your full-time job and set your own house rules.be your boss
cryptocurrency mining disadvantages
(a)Electricity — mining process consumes a lot of electric power. one should consider wisely before starting the mining process because The cost of Electricity can surely damage your earnings
(b)Losing Your Digital Wallet (private key) — This happens more often than you might think. If you lose your private key, you will be locked out of it. Once locked out, you are out forever.
©Mining pool scams — before you join any mining pool, do your research properly. i know of people who have joined the wrong mining pools and came back to me later broken, having spent their hard-earned cash. Always make sure that the mining pool is already established and has a good reputation.
Cryptocurrency Mining Concerns
Anyone can become a miner provided you have a source of Electricity and high computing power. The only reason miners contribute to blockchain development is the potential profit. The biggest concern lately and in the future is the increasing difficulty of the puzzles in securing blocks. The more the puzzles are solved, the harder it becomes for the next puzzle.
Years back, when bitcoin was new, mining was easy and could be done using a PC. Today the competition is high plus difficulty increases exponentially hence requiring high computing power.
One more thing is that the mining competition is unfair, leaving the mining process to a few large companies that have huge computing power. This is a huge risk since it can make the process centralized.
Coin creation is left for a few large organizations controlled by banks and other financial organizations. this is a huge risk for decentralization.
The future of mining
The proof of work is proving to be inefficient for decentralization. This paves the way for proof of stake, which maintains decentralization by preceding the huge computation power, which requires huge investment.
Gas-powered block-chain systems like Ethereum require developers to attach gas to a transaction fee. That gas fee will supply the computational power until the transaction is validated or the gas runs out. This is a safer way for miners to contribute to solving new blocks. By doing so, miners can maintain the block-chain more quickly and efficiently.
Final Remarks
Cryptocurrency mining has surely become one of the most intriguing and controversial topics in the block-chain community.
The state of mining affects each coin’s decentralized state, reliability, and value. That’s why it’s important to understand the concept of mining and whether this is something you might consider doing.
Many consider cryptocurrency mining as dead due to the control by a few centralized institutions. In later days I consider writing about cryptocurrency farming, which is considered much better and much easier than mining. As you all know, farming requires a smaller investment cost than the machinery used for mining. Stay tuned!
