Crypto Currencies Mining

Everyone has heard about the world of cryptocurrencies, in which many are already investing nowadays. Its great benefits are often highlighted as future digital currency or investment opportunities to earn more money. Also, the disadvantages: they are not supported by any official body and their variability is high. However, it pays little attention to one particular aspect: Where do they come from? Here we have to talk about cryptocurrency mining.

The definition of cryptocurrencies is the process by which network transactions are verified and distributed, which are later added to the blockchain. Thanks to this function, cryptocurrencies such as Bitcoin, the most important and well-known of all.

Why is the term "mining" used? It's obviously a metaphor, but in essence the math is very similar to the mining that goes underground in search of gold, coal, or other valuable minerals.

Crypto mining does not use a pick and shovel, but computer hardware and software. Its job is to put the processing power of one or more computers into a network service. Various cryptocurrency networks use these groups to ensure the authenticity of their users' transactions.

A fundamental part of the cryptocurrency mining process is verifying and validating transactions. This is expected through the so-called miners, who select transactions and add them to the block template. The overall process of making a cycle consists of five stages:

Confirmation:

Full nodes are the groups responsible for enforcing all the consensus rules of your network protocol. They are elements that provide security and stability to cryptocurrency networks. The main task is to ensure that the cryptocurrencies being sent have not previously been used for another transaction. In other words: there is no double cost.

Marketing grouping:

Then come into action mining nodes. They group pre-verified transactions into templates and add them to unverified blocks.

Hash and control data:

The next step is to register the necessary information to the cryptocurrency and verify the block. It is the stage of preparation of all the necessary elements to execute the hash function and start the work of obtaining the identifier of the block to be created. This activity is also done by mining.

Quality:

With the information provided by the mining node, the correct blockchain account is created, so that transactions can be verified and coins can be released. It's a process that can take more or less depending on the team used for the solution or the number of miners working on the same job.

The block is added to the network:

Finally, when a miner finds the solution to the hash function, a new block is created that is permanently recorded. All other pending transactions will be automatically canceled to avoid the possibility of double spending. That's when the miner's reward is released.

From this moment on, the information in this blockchain can no longer be modified. In some networks such as Bitcoin or Ethereum, their details can be publicly consulted.

 

For anyone who commits resources and efforts to mining cryptocurrencies, there is an opportunity on the horizon to reap their long-awaited reward. In fact, this is the engine that powers the entire procedure. A reward is obtained by adding new blocks in the cryptocurrency chain, which can be of two types.

• In commissions, paid by users who participate in transactions that create a new added block.
• New digital coins that enter circulation.

What is needed to mine cryptocurrencies?

Surely after reading this, you've turned on the light bulb above one of you and a dollar sign (or bitcoin) has been drawn in your eye. Why my cryptocurrencies from home if I only need a computer?

Although this is possible, it is not as easy as it seems. In fact, cryptocurrency mining calls for a significant amount of processing power.. It is not enough to have a computer or a computer network with a certain power, but it is important to have a stable power grid. In fact, stability is more important than speed in this process.

If these requirements are met, the next step is to install special software to solve mathematical problems (hashing). This block must include the verification system necessary for legal transactions that prove that it is a block. When the software solves the transaction, the miner receives a certain amount of digital coins. The faster and more powerful the mining hardware, the greater the chances of success.

Special equipment and software:

The system used to mine cryptocurrencies depends on the currency we want to mine. There are several options:

• Use an ASIC miner is a computer designed to perform a single and exclusive task: mining a specific type of cryptographic code.
• Make use of a computer with a graphics processing unit, or GPU.

The most common way to go is to use separate hardware for each type of currency. Many people have unsuccessfully tried to mine cryptos without the right hardware, spending a lot of money on the wrong computer equipment and consuming huge amounts of electricity for nothing.

Why do we need such a powerful tool and separate software? It's best to explain with an example: the hash function of networks like Bitcoin is made up of 64-character alphabets. The laws of probability tell us that finding the right combination that will release BTC and confirm transactions in such cases is beyond the reach of the human mind. That's the work of machines, devices with great computing power can calculate a huge number of different combinations in minutes.

In conclusion, it can be stated that the only thing that a miner can do is lend the computing power and electricity needed to perform these operations, receiving a reward in return. In general, pay in the cryptocurrency you work with.

Cryptocurrency mining farms:

It is logical to think that the more material we give to mining, the greater the benefits. Unfortunately, this means that large investments are out of the reach of the average citizen. It also requires adequate facilities and a team of technicians to attend to operations 24 hours a day.

Some countries like Russia o the United States (and until recently China) have invested heavily in cryptocurrency mining by creating huge facilities known as mining farms. The profitability of these farms is relative, because not only the necessary investment, but also because the price of cryptocurrencies causes constant fluctuations, as we have already seen, it is very volatile.

Another issue that calls into question the profitability of mining farms is that as the price of cryptocurrency increases, more resources are used for mining. And this has the effect of increasing the difficulty during mining.

Cloud mining:

Finally, we mention the cryptocurrency mining method that is available to anyone who does not have the necessary hardware. It's not meant to make huge profits, but it works. The cloud extraction is done through a shared and remote data processing center located in the "cloud" . In this case, the miner only pays for the service provided to the provider.