WHAT IS CRYPTOCURRENCY MINING?
Cryptocurrency mining is the process of verifying and adding transaction records to the public ledger, known as the blockchain. It is done by miners, who use specialized computers to solve complex mathematical equations to validate transactions.
Miners are rewarded for their work with cryptocurrency, which is released into circulation. This process helps to secure the network and ensure that all transactions are legitimate.
Proof-of-work
To understand mining, you need to know how the underlying principle works. The proof-of-work consensus mechanism verifies transactions on a blockchain network by solving complex mathematical puzzles.
The concept was adapted from digital tokens by Hal Finney in 2004 through the idea of “reusable proof of work” using the 160-bit secure hash algorithm 1 (SHA-1)
Proof of work requires a computer to randomly engage in hashing functions until it arrives at the output with the correct minimum amount of leading zeroes.
For example, the hash for block #775,771, mined on Feb. 9, 2023, is:
00000000000000000003aa2696b1b7248db53a5a7f72d1fd98916c761e954354
The block reward for that successful hash was 6.25 BTC and 0.1360 BTC in fees.
The nonce was 2,881,347,934, there were 1,519 transactions in the block, and the total value of the block was 1,665.9645 BTC. Remembering that a hash is generated and the nonce starts at zero, this block was hashed by a miner 2.8 billion times before reaching a number less than the target.
The Processes of mining summarized on the bitcoin white paper
1) New transactions are broadcast to all nodes.
2) Each node collects new transactions into a block.
3) Each node works on finding a difficult proof-of-work for its block.
4) When a node finds proof of work, it broadcasts the block to all nodes.
5) Nodes accept the block only if all transactions in it are valid and not already spent.
6) Nodes express their acceptance of the block by working on creating the next block in the chain, using the hash of the accepted block as the previous hash
OTHER CRYPTOCURRENCIES THAT CAN BE MINED?
Many different types of cryptocurrency can be mined asides from Bitcoin. The most popular ones are Litecoin, Grin, Doge, Monero, etc. Ethereum was on this list until its complete migration to Proof-of-Stake. Cryptocurrencies that can be mined use the Proof-of-work consensus mechanism.
Bitcoin is the most widely used and accepted cryptocurrency, while, Litecoin is a faster version of Bitcoin, and Monero is designed to be more private and secure than other cryptocurrencies.
The top 5 cryptocurrencies that can be mined include
1. LITECOIN (LTC); Litecoin is a faster version of Bitcoin. It was founded in 2011, two years after the launch of Bitcoin, by a former GOOGLE engineer known as Charlie Lee.
2. MONERO (XRM); Monero is primarily designed to enhance privacy. You can mine Monero with CPUs and GPUs. It is suitable for beginner miners
3. GRIN; designed to enhance privacy. GRIN can be mined using GPU miners and ASICS
4. RAVENCOIN; Ravencoin employs a peer-to-peer network to make it easier for parties to trade or transfer assets. It is built on a fork of Bitcoin and relies only on the community, with no master nodes or initial coin offerings. It cannot be mined using ASICs, allowing for cheap initial mining cost
How to mine cryptocurrencies
Mining Hardware
To mine cryptocurrency, miners need to have the proper hardware. This includes computers with powerful processors, graphics cards, and specialized mining rigs. These rigs are designed specifically for mining and can be expensive.
Mining rigs have various features, such as cooling fans, multiple GPUs, and more. Some miners even build their rigs to save money and customize their setup. Hardware such as GPU (graphics processing unit), ASIC (application-specific integrated circuit), or the latest FPGA (Field Programmable Gate Array) chips. When purchasing mining hardware, it is essential to consider their hash rate (performance) and electricity consumption.
Mining software
In addition to hardware, miners also need the right software. This includes mining programs designed to run on their computers or rigs. These programs are used to connect to the cryptocurrency network and start mining.
Mining programs come in various forms, such as open-source and closed-source. Open-source programs are free, while closed-source programs require a license to be used. Some programs are designed specifically for certain cryptocurrencies. Examples of Mining software include ECOS, BeMine, and Kryptex Miner.
Mining Pool
Mining pools are groups of miners that join forces to mine cryptocurrency. By pooling their resources, they can increase their chances of finding blocks and receiving rewards. Mining pools also help to reduce the amount of competition between miners.
Mining pools are becoming increasingly popular, as they can help reduce the mining cost and make it more profitable. However, miners must be careful when joining a mining pool, as some pools may charge fees or have other restrictions.
PROBLEMS ASSOCIATED WITH MINING
The major problems associated with mining are High Energy requirement as computational power of the sophisticated machines requires enormous amount of energy. This has raised a global concern for environmental safety.
Another major factor is the cost of mining, most people can’t afford the cost of the hardwares and softwares required for mining. With the high level of competition, those with more sophisticated computation power always get the mining reward. Making it very hard for the common man with less sophisticated machine to earn reward
CONCLUSION
Cryptocurrency mining is an essential part of the cryptocurrency ecosystem. It helps secure the network and ensures that all transactions are legitimate. Miners are rewarded for their work with cryptocurrency, which is released into circulation.
To mine cryptocurrency, miners need the proper hardware and software. Mining rigs and programs come in various forms, and miners can join mining pools to increase their chances of finding blocks and receiving rewards.
