Mining is an indispensable event in most cryptocurrency blockchain networks. This is a way to verify the transaction and reach a consensus on the point -to -point network. No central institution is required. The owner and operator of the computer system that constitutes a decentralized cryptocurrency network is called miners, and the newly created cryptocurrency is received as a reward for this work. Let's discuss in detail what does coin mining mean? How does coin mining work?
What does coin mining mean?
Mining is the process of generating and publishing new Bitcoin and verifying new transactions for dedicated computer networks.
Mining is the process of Bitcoin and several other cryptocurrencies to generate new coins and verify new transactions. It involves a huge decentralized computer network around the world, which is used to verify and protect the blockchain -record virtual classification accounts for cryptocurrency transactions. As a return to contributing its processing capabilities, computers on the Internet will receive new coins rewards. This is a virtuous circle: miners' maintenance and protection of the blockchain, blockchain reward coins, coins provide incentives for miners maintained blockchain.
What is cryptocurrency mining? Cryptocurrency mining explanation
Terms encrypted excavation refers to obtaining cryptocurrencies by using computers to solve the addition of secret equations. This process involves verification data blocks and adds transaction records to public records (classified accounts) called blockchain.
In a more technical sense, cryptocurrency mining is a transaction process that involves the use of computers and encryption processes to solve complex functions and records data to the blockchain. In fact, the entire device network has participated in encryption mining and saved sharing records through these blockchain.
It is important to understand the cryptocurrency market itself is a substitute for traditional banking systems we use worldwide. Therefore, in order to better understand the working principle of encrypted mining, you first need to understand the difference between centralized systems and decentralized systems.
How does coin mining work?
Ceducters use their computers to solve complex mathematical equations, which basically means cracking code. After cracking the code, you can authorize the transaction. In return, you will get cryptocurrencies.
When the miner successfully resolves mathematical formulas and verified the transaction, they will add data to the public classification account, called the blockchain, which is protected by many encrypted technologies.
Proof of work
In order to ensure that only verified cryptocurrency miners can mine and verify transactions, and the workload proof consensus agreement has been established. The agreement also ensures that the network is free of any external attacks.
The workload proves is a way to publish the latest blocks in the chain. The work itself was done by the miner, and their computer executed millions of calculations to change the given input to the required output.
The first miner to produce the required output shared it with the network, and then the network check whether it runs and executes normally. If so, miners will receive cryptocurrency rewards.
Proof of stake
Another method of verifying blockchain transactions is equity proof, although this is not technically excavated. This allows the current holders of cryptocurrencies to use their existing coins as mortgages in order to have the opportunity to become those who verify blocks. Each block needs multiple verifications, and they are randomly selected from candidates who provide mortgages.
In terms of energy expenditure, the equity certificate is more environmentally friendly than the work certificate, because fewer people use the energy required for verifying the blockchain. A lot of computing power.
Computer and legal association reports that the equity certificate is 99%less than the energy of the workload.
Why is mining important?
In addition to investing new coins into circulation, mining is essential for Bitcoin (and many other cryptocurrencies). It verifies and protects the blockchain, allowing cryptocurrencies as a decentralized network operation without third -party supervision. It also inspired miners to contribute their computing power to the Internet.
How to mine cryptocurrencies
Many people who are interested in cryptocurrencies are also interested in cryptocurrencies, especially Bitcoin (BTC), Eth (ETH) and dog coins. Generally speaking, excavating cryptocurrencies can be as complicated as you want.
For beginners, you can choose from many types of encryption mining equipment. Central processors (CPUs), general processors (GPUs), on -site programming door array (FPGA) and special integrated circuits (ASICs) are different types of computer hardware that can be used to tap cryptocurrencies -you can discuss in depth in us Understand them when the theme. The hash rates and energy efficiency of these mining equipment are different. These are the two key factors that determine mining profitability. In addition, the mining algorithms of various cryptocurrencies are often different from the overall mining process. For example, you will not excavate the same devices of ZCASH (ZEC) using the same devices as the Bitcoin cash (BCH) or the same way.
Advantages and disadvantages of cryptocurrency mining
The obvious benefit of excavating cryptocurrencies is that you can make money from it. In some cases, income is huge.
The main disadvantage is that excavating cryptocurrencies also requires a lot of money, whether in terms of hardware you need to buy or mining the power required. Unless you are very good at it, it is difficult to start and profit, and you may find that cryptocurrencies have lost value in its turbulent market during the time you spent.
Another disadvantage is the impact on the environment. As reported by the New York Times, the process of creating Bitcoin consumes about 91 Taiwaphta's electricity each year -the electricity consumption of the country with a population with a population of about 5.5 million.
However, the mining of equity certificates aims to reduce the impact on the environment, and in the long run, it may help reduce this adverse effect.
If the cryptocurrency mining is so simple, why not everyone do this?
Although everyone may want to use encrypted mining, the fact is that it is not suitable for everyone.
1. Cryptocurrency mining is resource -dense type
First, today's cryptocurrency mining requires a lot of resources in terms of computing power and electricity. Why? Because encrypted mining requires a lot of computing power to constantly generate new speculation. If you succeed, then you will not only generate new bitcoins, but also update the blockchain by adding information to the end of the ledger.
2. Cryptocurrency mining is expensive
Not only do you need to worry about whether you have enough processing ability and electricity to provide motivation for your operation, you also need to keep in mind the cost related to such a large -scale plan. Although you can only use your personal computer to encrypt me, those days have long been gone.
If you want to have a chance to defeat other cryptocurrency miners, then you need to have technical and processing capabilities to compete with them. This means having more equipment and getting cheaper power.
3. Investment return is not the same as before
Although some people can make money by excavating cryptocurrencies, not everyone is the same. The longer the time, the more people participating, and the return on investment from cryptocurrency and miners will decrease.
Let's take Bitcoin as an example. About four years (or every 210,000 blocks), Bitcoin will experience a halving incident once. This means that the number of rewards obtained for each blockchain block will be reduced by half. Therefore, when people start mining Bitcoin for the first time in 2009, each block will receive 50 Bitcoin. As of May 11, 2020, the last decrease, the ratio has dropped to 6.25 BTC per block.
4. The geographical location is not feasible (or prohibited)
We mentioned earlier that although cryptocurrency mining is not illegal in some areas, it is illegal in some places. As we mentioned earlier, governments around the world have different opinions on cryptocurrencies in cryptocurrencies. Maybe, some governments in different geographical locations have even banned investment or use cryptocurrencies as payment methods.
The risk of cryptocurrency mining
In addition to legitimacy issues, encryption mining may also involve other risks -from the use of excessive energy that may have affected the environment to supervision and security risks.
1. Environmental risk:
Because mining Bitcoin requires so much computer capabilities and consumes so much power -this year Bitcoin's hash rate has been at a historical high -the impact of cryptocurrency mining on the environment has been strictly reviewed. Last spring, when a well -known car manufacturer refused to accept cryptocurrencies due to its potential environmental losses, this problem became headline news.
How is this going? Researchers estimate that about 80% of Bitcoin mining mainly occurs in four countries (China, Russia, Kazakhstan, Iran) -The energy prices in these countries are low, and fossil fuels such as coal provide most of the country's electricity. As a result, these networks have major risks of higher carbon emissions.
Some newer cottage (alternative to Bitcoin) claim that it is more environmentally friendly, but when you consider how to mine cryptocurrencies like Bitcoin, this is a risk that needs to be considered.
2. Security Risk:
As part of a decentralized global system that is basically not regulated, it will indeed bring some security risks. In some cases, using Bitcoin software may make your personal devices more vulnerable to attack. If you are part of the mining pool, this may help reduce some risks.
3. Regulatory risk:
As mentioned above, the legitimacy of Bitcoin is becoming more and more complicated, and it depends on the wave of cryptocurrency supervision around the world. These regulatory waves seem to fluctuate every week and every region. These may include how to define Bitcoin (such as commodities or currencies); how to use it (for example for certain purchases or payment instead of other); how it is taxed.
4. Investment risk:
The value of Bitcoin and other cryptocurrencies is another fluctuating factor. Ten years ago, many investors bet on the overall trajectory of cryptocurrencies, but as the recent recent valuation fluctuations shown, this is not something investor can expect.
The above content introduces what is cryptocurrency mining, and what are the risks of mining. Cryptocurrency mining is an interesting alternative to traditional centralized systems running globally globally. However, it is very laborious in computers and power resources, so it is not feasible for many users. And the price of cryptocurrencies is very volatility, there are many uncertainty, and the risk of investing in mining is relatively high.
