Crypto Mining – Bling Bling
Cryptocurrency has been in the news recently when China cracked a whip on its mining. The financial world also saw cryptocurrencies go through volatile movements. Many crashed massively wiping out a lot of wealth. The optimist call it mere market correction. However, the enigma surrounding cryptocurrencies will continue to be a source of fascination.
Mining has an enticement similar to the gold rush of the 1800s. It is a process by which new coins are steered into circulation. Cryptocurrency mining refers to the process of gathering cryptocurrency as a reward for the work completed. In a nutshell, it is a process of solving cryptographic equations. These include validating data blocks and adding transaction records to the public record known as the blockchain. There are several ways in which mining works.
1. Cloud Mining – A cloud host will rent out their mining rig service for a fee and the earnings are transferred to the crypto wallet minus the electricity and maintenance cost.
2. CPU Mining – It is a very slow process where earnings could take a longer time to be realised. But for first-time miners, this is a lucrative option.
3. GPU Mining – It is the most popular method of mining. They use graphic cards to mine cryptocurrencies.
4. ASIC Mining – Application-specific integrated circuits are designed to perform specific tasks. It is a controversial mining technique as ASIC users tend to take up all the earnings from the other users.
How Mining works
Mining is a very energy-laden process. It requires tremendous amounts of energy consumption to create a rig and mine cryptocurrencies. Each currency has a different mining process. Some require high computational systems, high power consumption and high-end Graphics processing unit. Expensive hardware and operating costs are the flip sides of this process. One should also not lose sight of the environmental effects of the mining process.
So mining is where the miners verify the legitimacy of transactions in order to earn cryptocurrencies. This requires an understanding of the blockchain concept. Mining is performed using sophisticated computers that solve very complex computational math problems.
Steps involved in Mining
1. Nodes verify the legitimacy of transactions
2. Transactions are added to form a block
3. Hash and other types of data added to the unconfirmed block
4. Miners verify the legitimacy of the block hash
5. Block confirmed and added to the chain
Transactions paid in Bitcoin are added to a block. Once the verification process is complete, it gets added to the blockchain. The advantage here is to avoid double-spending by keeping a permanent public record. A hash is generated for the new block and it gets added to the existing blockchain. Once the miner gives a shout out to other miners that he has cracked the code, the other miners join in to check the legitimacy of the new block by checking their hash. The final act is when the proof of work is complete and the block gets added to the existing blockchain.
“Spoke with North American Bitcoin miners. They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising.” – A tweet by Elon Musk sent the price of Bitcoin surging.
Authors – Benila Jacob, Anthony Preetham