What is Cryptocurrency Mining? /Bitcoin Mining
Here is all about Bitcoon Mining alongwith solutions to any minable Crypto Currencies Solutions.
- What is Mining?
Mining is a vital feature of many cryptocurrencies. Put simply, it’s the process by which transactions are checked to see that they follow certain rules of the network. Miners are encouraged to perform the necessary checks and verifications financially.
This is done with the fees that are collected from users paying to send their transactions, as well as a special reward of new currency that gets released with every new block added to the chain. This type of payment is called the block reward.
At its most basic, all you need to mine cryptocurrency is a computer, the internet, and a special piece of software. You’ll find this software at the GitHub repository of the cryptocurrency you have chosen to mine. Alternatively, you might find it already built in to the cryptocurrency’s wallet software. This is the case with the likes of Monero and Electroneum.
A Breakdown of Cryptocurrency Mining
Let’s look at a breakdown of what a cryptocurrency mining unit is actually doing to secure the network and release new coins. For simplicity, I’ll refer to the currency being mined as Bitcoin. The process is very much the same for all cryptocurrencies that require mining though:
- First, the computer checks a list of waiting transactions against the blockchain. They are making sure that none of the coins have been spent twice and each account or wallet has enough balance to send the Bitcoin transaction being requested.
- Then, the computer bundles these verified transactions into a block.
- Once a set of transactions is formed into a block, the miner must solve a sort of puzzle to publish the block on the chain. This puzzle is to guess the “hash” of the block.
Note: A hash is created by using a cryptographic algorithm to turn the text that represents all the transaction amounts for that block, as well as their senders and receivers into a string of characters. This string of characters is completely unique and can only refer to the block trying to be published. If you were to change some detail of the block’s information, the hash would completely change too. This is very important.
- When the mining computer system finally guesses the correct combination of letters and numbers of the hash, it can publish the block at the end of the chain.
- Since each block contains the hash of the previous block too, the chain cannot be tampered with. If someone was to try to alter the number of Bitcoin at a certain address, it would make every block in the chain (after the tamper) invalid.
A cryptocurrency network automatically changes the difficultly of the problems that need to be solved. This ensures that coins are released at a steady rate. If many miners are mining the network, the difficulty will increase.
If very few miners are securing the network, it will be relatively easy to solve the problems. The difficulty of a coin also influences its profitability to mine. If your hardware is limited to GPU units, the best coin to mine will have a lower difficulty.
Glossary of Cryptocurrency Mining Terms
- Hash rate – how many guesses a miner can make at the hash of a block.
- ASIC – Application-Specific Integrated Circuit. These chips have been specially designed to mine cryptocurrency. They are expensive to buy and power hungry but are the best on the market for mining.
- Mining rig – A mining rig is a collection of CPUs, GPUs, or ASIC chips running together to increase the miner’s hash rate.
- GPU – Graphics processing unit designed to render 3D graphics. They can create more guesses at a hash than a CPU in the same amount of time.
- CPU – Central Processing Unit. A CPU is like your computers brain. It processes information given to it by computer programs. CPUs are also the cheapest, most readily available way to mine cryptocurrency.
- Proof of work – the process of guessing the hash is known as proof-of-work. Proof-of-work makes it very expensive to cheat a cryptocurrency network. It is a vital security feature of most blockchain networks.
So, you now know how mining works but how do you go about choosing the best coin to mine?
What to Look for When Choosing a Coin
If you want to pick the best coin to mine, there is a lot to look. First, you need to think about what you’re mining cryptocurrency to achieve. To some, this will be obvious – immediate profit. Others will be considering their mining as a hobby that could make them very rich in the long-term.
Finally, there are those people who want to mine cryptocurrency to secure a network. This is the case with many Bitcoin hobbyists. Whilst they won’t be making any direct profit, they are helping to decentralise the network. For them, mining the network is like paying for anti-virus software to secure your computer – everyone should be doing it.
For the purposes of this article, I’ll presume that you are wanting to profit from your mining activities.
Short Term Profitability
If you’re just looking for short term profits, you will have to stay up-to-date with changing mining conditions for different projects. Since the mining difficulty of each currency is constantly altering, it’s no good me telling you to point your hardware at one coin and for you to just let your hardware go to work at it. What’s profitable today might not be tomorrow!
For this reason, it makes much more sense for me to explain how to discover what to mine yourself. That way, you constantly know the best coins to mine and can switch to mining altcoins that represent the most profitability at any given moment!