What is mining cryptocurrency in simple words – full review

The process of mining Bitcoin and many other cryptocurrencies is called mining. This is one of the cornerstones of cryptocurrency that distinguish them from Fiat and other electronic currencies. Mining is not comparable to conventional printing of money, because it has a specific function. And most importantly – mining can engage almost everyone. Don’t believe? Then read this detailed guide for beginners with theory and practical examples.

What is mining

The term mining is an anglicism comes from the Mine (mining). Speaking of difficult words, this process represents activities the maintenance work of the network by closing and creating blocks in the blockchain using computing power. The miner uses the power of iron to perform special calculations to look for a digital signature (hash), which will close the block. Miner, who “will find” digital signature, receives a reward of 1 unit of cryptocurrency. Mining supports the network, which guarantees protection against duplicate transactions.

Speaking in simple words, mining is the extraction of crypto currencies using the capacity of special equipment. For Bitcoin and other coins is the only way of increasing the issue. The miners are rewarded, as their activity provides for the operation and integrity of the entire system. This is the main task of mining.

In the initial stages of mining can engage the owner of almost any computer using the capacity of the processor. When in 2009-m year, Satoshi Nakamoto and launching Bitcoin they were originally laid on to the ceiling by the maximum of emission of coins – 21 000 000 BTC. Bitcoin also occurs the recalculation of difficulty of the mining every 2016 blocks (about 2 weeks). Such system properties protect bitcoin from inflation and are the reason for mining new coins requires more powerful equipment. According to forecasts, all the BTC coins are mined in the mid-22nd century.

Already in 1-1,5 years after the emergence of Bitcoin mining began to use the powerful graphics cards that run in Crossfire mode or SLI. Then the miners were able to recapture their investment in a few weeks. But the minimum requirements to access the profit continued to grow. By 2012, the year of production of the cue ball even on the most powerful CPU (processor) became unprofitable. The era of farm units, between powerful cards and Asimov (ASIC) is a specialized mining equipment.

On a PC now really to get the coins like Monero, FantomCoin, DigitalNote. But even a powerful PC not bottom for more than a few tens of cents a day. Similar situation and with single graphics cards on desktop computers.

Mining pools

In connection with the increasing difficulty of cryptocurrency mining began to form pools – unions of miners (so-called “miners”). As we noted above, to receive the reward to the miner needs to find the digital signature for the closure of the unit. In solo mode even powerful farm it will take a lot of time. So are the pools like Minergate, uniting miners. Each participant in the pool receives a reward equivalent to mining capacity.

PoW and PoS

In Bitcoin, where the efficiency of mining is directly dependent on the performance of the hardware is used the Protocol Proof-of-Work. It protects the network from double spending and is the basis of a reward system in mining. The more the miner did the work, the higher will be his reward.

Some cryptocurrencies use the Protocol Proof-of-Stake. Mining as such is not in them. Network protection is provided by the presence of cryptocurrency wallets. This Protocol plans to move the platform Ethereum. This means that the production of ETH in the future will stop. This was stated by the Creator of Ethereum Buterin:

“When we get to the Protocol Proof-of-Stake, at the first stage the need for mining ether will fall sharply. In Proof-of-Stake algorithm, which does not require a large number of computers are constantly making calculations. This algorithm, which uses a coin inside the platform. Consensus will be much cheaper and safer. And in fact the miners might lose your business.”