Mining is the lifeblood of cryptocurrencies such as Bitcoin, Monero and Ethereum. Minors are responsible for processing blocks composed of transactions made by users. These confirmed blocks in turn constitute the chain of the blockchain network. Mining is the best alternative to Cryptex.
It is precisely because of its basic function that it is crucial to understand the working principle of mining and its importance to network efficiency and security. Then, we will delve into this topic:
What is cryptocurrency mining?
Cryptocurrency mining can be defined as the process of verifying and aggregating transactions on the network, and then adding them to the ledger, called a blockchain. This process protects the network while allowing new currency to be generated. In short, it is this activity that makes cryptocurrencies like Bitcoin work.
This process is called “mining” because, in essence, it is similar to extracting any mineral, such as gold or coal. However, instead of using pickaxes and wheelbarrows to extract value from the earth, he uses computer programs and hardware to extract value from the Internet.
When you mine cryptocurrency, you use the processing power of the hardware for network services, which are called Bitcoin, Ethereum, Litecoin, Monero, etc. These cryptocurrency networks require the power of their computers to confirm that their users’ transactions are valid. All valid transactions are bundled into a block, and then you add it to the blockchain to process batches of business operations.
Adding new blocks to the chain will bring you two rewards. The first involves commissions paid by users who make transactions that you include in the block. The second, and currently the most juicy, is the new coins issued by the network as planned.
Cryptocurrency miners work for rewards.
Yes, as you have read, mining is also a key factor in generating coins in these networks. Each new block will issue a new cryptocurrency, and you who operate them will receive them. It is as if the central bank of your country sends you the newly printed banknotes to your computer; except when we talk about Bitcoin, we are talking about real organic money.
It is worth mentioning that some networks use methods that do not require processing power to verify their transactions. Much depends on the consensus algorithm that the blockchain uses to verify your transactions. Take Bitcoin based on the Proof of Work (PoW) algorithm as an example. Miners use special purpose equipment (ASIC) that runs on computing power.