Even though over the years, people had been thinking about how transactions could be carried out without the need for a centralized system, or middleman, no one was ever able to translate these ideas to reality. Not until, the entrance of Satoshi Nakamoto- a pseudonym, who in 2008 released his paper on cryptography and its’ workings and who in 2009 released his cryptocurrency, Bitcoin with the first ever transaction also taking place that year. Cryptocurrency is a medium of exchange that uses cryptography to ensure secure exchange of information between different partied without the use or need of a centralized system. This exchanged information is also made available on a public network.
Considering all its offerings, it is no wonder that cryptocurrency is getting a daily dose of widespread popularity and critical acclaim.
What is cryptocurrency mining?
Cryptocurrency mining is the process by which transactions made across the blockchain network are verified and added to public ledger to the end that it will be available for all to see. This is also the process responsible for the mining otherwise, the creation of new cryptocurrency.
Who can do this mining?
Because this process involves a lot of technicalities, one of which is trying to solve a computationally difficult puzzle, not everyone can be involved in it. Rather those who are patient, have problem-solving skills and are particularly interested in this venture should be the ones involved in it.
What do cryptocurrency miners do?
After cryptocurrency transactions are performed, cryptocurrency users broadcast information about these transactions. This information is then collected by miners who proceed to verify the authenticity of this information. After this verification, they proceed to compile this information into a transaction block which is then added to the blockchain network. To prevent this process of adding transaction blocks to the blockchain network from being porous and to prevent fake blocks from being added, before a miner can add the block to the network, he has to solve a very difficult puzzle. If he can do this, then he goes to broadcast the solution to this puzzle to a network of other miners. If these other miners can verify that this solution is correct, the successfully mined transaction block is then added to the public ledger to the end that it will be added to the blockchain. Following this addition, new cryptocurrencies are mined, and the miner is then rewarded for his effort.
Incredible facts about cryptocurrency mining
While you might have heard lots about cryptocurrency in general itemized below are incredible facts about cryptocurrency mining:
- Cryptocurrency mining is essential to cryptocurrency distribution as it is the only legit and permitted way of introducing cryptocurrency into the system. Perhaps based on the maxim, “you cannot give what you do not”, cryptocurrency creators designed this process of mining to ensure that as cryptocurrencies are being bought, more are being mined, that is created. These newly mined cryptocurrencies are then added to the those already in circulation and are used as incentives for miners to encourage them to continue investing effort in that they can buy these cryptocurrencies at a subsidized rate. Hence, this method which controls cryptocurrency distribution is essential to the end that without mining, there probably would be little or no cryptocurrency in circulation.
- Requires a quite large start-up capital: Because cryptocurrency mining cannot be performed without the possession of certain hardware and software by miners, potential mines need at least $3000 to $5000 to enable them buy the necessary tools they would need.
- Cryptocurrency mining is a good source of alternate income. If you as a cryptocurrency miner, are willing and ready to invest at least $3000- $5000 in the purchase of hardware you will need to buy, then you could make about $50 per day. If you, however, want to be a small-scale miner then you could get about $1 to $2 dollars per day. With this, in 18 to 24 months you should have been able to get $1000 for hardware purchase.
- Cryptocurrency mining involves a lot of calculation. Because this process is creative and quite lucrative, a lot of people are involved with it. How are these people then regulated so that the maxim “too many cooks spoil the broth” will not be a reality in this case? Computational puzzles. If these can be successfully solved and the solutions are verified then the miner’s authenticity will be verified and he will be a reason why more cryptocurrencies were created. This calculation thus serves as a sort of precautionary measure so the whole network can work without hitches and unnecessary infiltrations.
- Cryptocurrency mining is a competitive venture: a lot of people are interested and involved in cryptocurrency mining. While some are looking to partake of the income successful mining affords miners, others are also looking to have the satisfaction of being ‘responsible’ for the mining of new cryptocurrency. This just makes it all competitive, and the major bone of contention among miners is the computational puzzle needed to be solved before new transaction blocks can be added to the blockchain. All miners look to and work relentlessly to solve these puzzles.
- Cryptocurrency mining helps keep the network secure: Because no one can create and add transaction blocks to the blockchain network except they solve some puzzles which have to be verified by a large number of people, the incidence of tampering with and falsifying information is checked. This helps to keep the network secure and helps foster communal trust.
- A lot of countries are getting involved with cryptocurrency and its’ mining. While on the one hand Australia, Canada, Eastern Europe, Iceland, and Russia have been termed the ‘most prospective places’ to find mining farms for cryptocurrencies especially, bitcoins, on the other hand, about 79% of the world’s mining farms are found in sparsely populated outlying areas in China. These large numbers are due to the occasion of cold climate and inexpensive electricity present in these areas; these two factors are key to cryptocurrency mining.
- For the cryptocurrency, Bitcoin, only 21 million of these can ever be mined. As of now, about 12.6 million of these have already been mined (despite the fact that an average of 3,400 new Bitcoins is mined daily), meaning that there is still quite a number of these in reserve to be mined and available to the community. Like Bitcoin, other cryptocurrencies are also fixed in number. One thing that checks these numbers are algorithms that automatically reduce the number of mined coins by half every few years.
- Of all the mined cryptocurrency, only about 38% have been used in transactions. The remaining 62% have never been seen or recorded to be used after they were mined and it is becoming highly likely that they will continue to remain inert to transactions.
- If you are a potential miner, then ensure you have at least 6 things before venturing into cryptocurrency mining. These 6 necessities are: i) personal curiosity and drive which will spur you on to input your best in mining and to try to find the most advanced or efficient ways to optimize your performance ii) Free mining software package without which your dreams of being a miner will remain dreams iii) membership at an online mining pool which would come handy in times when you need collative effort to succeed (better) iii) membership at an online currency exchange which would be useful when you have been given cryptocurrency in exchange for your service, and you would like to alternate these cryptocurrencies to cash iv) ATI GPU (graphics processing unit) or specialized processing devices called mining ASIC chips which will help provide you with the needed accounting services and mining work. v) reliable internet availability and connectivity with a top speed vi) computer device set up in a place with proper ventilation to combat the heat generated during mining. You should consider using a desktop rather than a laptop, a notebook, a tablet or even a phone as a desktop is more efficient. You should also consider getting another desktop if you frequently use your desktop as, during the process of mining cryptocurrency, you will not be able to do anything else on the computer.
What is the essence of cryptocurrency mining asides from creating new cryptocurrencies?
The whole concept of cryptocurrency mining is to the end that:-
- Bookkeeping and accounting services will be provided for the Blockchain network to checkmate activities
- Miners get to be rewarded for their services in either virtual or conventional currency
- Personal costs of miners like electricity and hardware are kept on the low.
The whole concept of cryptography, cryptocurrency and cryptocurrency mining is one that many people and organizations world-over are still trying to understand with some being skeptical about these. In the midst of these ongoing research and skepticism, cryptocurrency has so far been tried and trusted. As such cryptocurrency miners are encouraged to continue with their activities.