Crypto Mining : How it works and runs a blockchain system

Red White Attractive 10 Ways To Earn Money Youtube Thumbnail (4).jpg

image.png

If you're reading this, you probably already know a bit about cryptocurrency and have some knowledge about this exciting digital world. There are thousands of different tokens and coins in this growing industry, with new ones being created almost every day. It all started with Bitcoin, the very first cryptocurrency, which came into existence on January 9, 2009. Along with Bitcoin, there's something called the blockchain, which is a special technology that makes it all possible.

Cryptocurrency and Blockchain

Bitcoin and other cryptocurrencies are seen by many as a form of investment. Imagine it as digital money that people can buy, sell, and hold, just like the money we use in everyday life. Right now, there are millions of people who are participating in this fast-growing industry, where they trade, invest, and keep different coins. Some even call it internet magic money as it has made many people rich in the past. Anyways, The blockchain technology is what makes cryptocurrencies special. It's like a giant decentralized database that keeps track of all the transactions made with these digital coins. It's different from a regular bank or any other centralized system because no one person or company controls it. Instead, many computers all around the world work together to make sure everything is accurate and secure while following a decentralized process. People find cryptocurrencies exciting because they offer new opportunities. It's like being part of a digital revolution where traditional ways of doing things are changing. Some people buy cryptocurrencies, hoping that their value will go up over time so they can sell them for a profit. Some even use cryptocurrencies for buying things online or even donate to charitable causes.

Have you ever wondered how digital money, also known as cryptocurrencies are created? Well, it's time to fasten your seatbelt for an exciting journey into the world of crypto mining! Imagine a virtual treasure hunt where you can use your computer to unlock hidden coins while helping to keep the digital world running smoothly simultaneously. So now, let's explore the fascinating world of crypto mining together!

What is Crypto Mining?

Crypto mining is like being a digital detective, but instead of solving crimes, miners here play a crucial role in verifying and recording transactions made with the blockchain system, such as Bitcoin or Ethereum. After they make sure everything is secure and valid in that transaction, they then authorize the transaction a green signal to pass. How do they do it? Well, By using powerful computers to solve complex mathematical puzzles! Just think of crypto mining as searching for digital gold, where Miners compete against each other to solve mind-boggling mathematical problems. The first miner to find the solution gets rewarded with newly created coins which are added to their wallet. This process adds a new block to the cryptocurrency's blockchain, a fancy digital ledger that records all transactions. Isn't that amazing? One more amazing thing about this is that after a block is created, it gets chained with the previous one and the process gets continued with every block, so it's almost impossible to manipulate or delete the data in any single existing block as they are all connected together like a chain, hence the name blockchain.

How does Bitcoin mining work?

Now, let's take the same Bitcoin as a practical example of how the reward system works for miners. For Bitcoin, it has a predetermined limit on the total number of coins that can ever exist, which is set at 21 million Bitcoins. When Bitcoin was first created, miners who successfully solved a block of transactions were rewarded with 50 Bitcoins! However, to ensure scarcity and controlled inflation, the Bitcoin protocol includes a mechanism called "halving." Approximately after every four years or after every 210,000 blocks, the mining rewards are halved. This means that the number of new Bitcoins created as a reward for mining is reduced by half. For example, after the first halving, the reward decreased to 25 Bitcoins per block. After the second halving, it further reduced to 12.5 Bitcoins, and so on.

The halving process continues until all 21 million Bitcoins are mined, estimated to occur around the year 2140. At that point, no new Bitcoins will be created through mining, and miners will rely solely on transaction fees as their reward for securing the network. The reduction in mining rewards due to halving has several effects. Firstly, it creates scarcity, meaning there are fewer new Bitcoins entering circulation. This scarcity can contribute to the value of Bitcoin increasing over time. Secondly, halving incentivizes miners to continue supporting the network and validating transactions, even as the reward decreases. Lastly, it helps control inflation by gradually distributing Bitcoins over an extended period. However, not every crypto like Bitcoin and Ethereum has a predetermined limited supply and they can create as many tokens as they want, but over a long time frame, it certainly damages the value of those particular coins because of having an unlimited supply after a certain time and hence decrease in demand. Note that there are other mechanisms there as well other than Proof-of-work (PoW) which helps to run any particular blockchain system such as proof-of-stake (PoS), Proof-of-Time (PoT), Proof of Authority (PoA), Delegated Proof of Stake (DPoS), Proof of Burn (PoB) etc. and even Ethereum recently have migrated from Pow to PoS mechanism to run its blockchain system.

Proof of Work (PoW)

Proof of Work (PoW) is a consensus mechanism widely used in blockchain networks including Bitcoin to maintain trust and security. The concept of "work" in PoW refers to the computational work performed by miners that involves solving complex mathematical puzzles using physical computer machines for significant computational power and energy consumption. Firstly, it helps keep the blockchain secure by making it hard and costly for hackers and thieves to change or cheat the system. The computational work needed acts as a barrier because altering the blockchain would require a lot of computer power, which is very expensive. This discourages attackers as it wouldn't make it financially beneficial for them anymore with this approach. Secondly, PoW ensures a fair and decentralized system where miners who contribute the most computer resources get rewarded accordingly by having the chance to add new blocks to the blockchain. This way, no single person or group can control the whole system. It's like a fair competition, where those who put in more effort have a better chance to succeed.

Mining Hardware & Software

To mine cryptocurrencies effectively, miners use powerful computers known as mining rigs. These rigs are specifically designed to handle the intense computational demands of mining. They consist of high-performance processors, graphics cards, and sometimes specialized mining chips called ASICs (Application-Specific Integrated Circuits). These components work together to perform the intricate mathematical calculations required for mining.

On the other hand, Mining software acts as the bridge between the mining hardware and the blockchain network. It helps miners connect to the network, access the necessary information, and execute the mining process. The software provides a user interface where miners can configure their mining settings, monitor their mining progress, and view their earnings. Additionally, it handles tasks such as managing the mining hardware, optimizing performance, and selecting the most profitable cryptocurrencies to mine.


I hope you liked reading the post above and gathered a basic knowledge about how mining works in the blockchain. If you have any thoughts or questions regarding this topic please let them be expressed in the comments below an di will be seeing you all in my next post.

Posted Using LeoFinance Alpha



0
0
0.000
4 comments
avatar

This post has been manually curated by @bhattg from Indiaunited community. Join us on our Discord Server.

Do you know that you can earn a passive income by delegating to @indiaunited. We share more than 100 % of the curation rewards with the delegators in the form of IUC tokens. HP delegators and IUC token holders also get upto 20% additional vote weight.

Here are some handy links for delegations: 100HP, 250HP, 500HP, 1000HP.

image.png

100% of the rewards from this comment goes to the curator for their manual curation efforts. Please encourage the curator @bhattg by upvoting this comment and support the community by voting the posts made by @indiaunited..

This post received an extra 2.55% vote for delegating HP / holding IUC tokens.

0
0
0.000