Those who are not really interested in cryptocurrency still associate mining with coal, miner’s helmet and a lamp. The Coin Shark decided to make it clear, what is mining and how it is carried out.
Mining is indeed an extraction of contemporary gold – the cryptocurrency. To extract it, miners actually have to explore the virtual space, conducting complex operations. Yes, they don`t have to dig the earth – they carry out calculations. Anyway, how does it all work?
To mine means to issue a cryptocurrency. Everybody can do that. US Federal Reserve System issue dollars, European Central Bank issues euros, but cryptocurrency, like for example BTC or ETH, can be issued by any user. To do that they should “help” functioning of a particular digital currency blockchain that is in charge of recording all cryptocurrency transactions. Blockchain is stored on every user’s device and constantly updates, as there are new transactions made all the time. Mining is the process of creating new blocks to support the operation of a particular cryptocurrency platform. This process includes making calculations. Miner seeks to find the needed algorithm (hash) with particular parameters and, of course to get a reward for that.
Have you already decided to start mining? Wait a minute, it is not that easy. The more computing power a miner has, the higher their chances to generate a block. Don’t think that a modern computer with the cutting-edge processor and graphic card will be enough. Huge mining rigs with hundreds and thousands of graphic cards can grant you really successful cryptocurrency mining. However, industrial-scale mining is too expensive, and thousands of digital miners still mine cryptocurrency without supercomputers and get their money. It is not easy to carry out all the necessary calculations for getting cryptocurrency. Depending on the type of cryptocurrency, the calculations can take minutes and days. If we take Bitcoin as an example, it will be clear that (taking its restricted volume into account) the more coins were mined the more computing power is necessary to generate new blocks. Pools (association of miners) can be created to increase the chances of a successful block generation. Each pool member does a part of calculations and the whole team is then more likely to get a reward. Their reward is distributed considering the amount of computing power provided by each user.
Today people gain thousands and millions dollars out of mining. However, do not expect it to become your family business. Mining will not always be so profitable. For example, Bitcoin`s architecture includes the reduce of the reward for generating blocks. Ten years ago one block was rewarded with 50 BTC, however, after each 210 thousand blocks (approximately once in 4 years) the reward is reduced two times. Moreover energy prices and cryptocurrency market conditions also affect mining. Cryptocurrency mining will stop being that popular in the future, at least in a way it exists today. Anyway you still have the opportunity to board this “mining-train” and make your fortune before it comes to its final stop.