As Cryptocurrency begins to gain global recognition and form an integral part of the World Economy, debates about Crypto mining and miners are gradually surfacing. Before now the word mining implies digging the earth to discover treasures. The process is indeed a rigorous one that requires the use of explosives to blast through hard surfaces. It requires heavy-duty machines and a vast labor force of capable men.
Therefore, one can be forgiven if such a fellow feels the same process is required to mine Cryptocurrency. Nevertheless, it is imperative to correct that notion because cryptocurrency is a virtual asset without any physical form. One should be contemplating how it is possible to unearth virtual assets using explosives and heavy-duty machines.
While Crypto mining doesn’t require physical processes, heavy machinery, or human labor as required by regular mining processes. It still shares a few similarities with the former. Every miner aims to discover new treasures, and Crypto mining isn’t an exception. While regular mining requires heavy-duty machines, Crypto Mining only requires Supercomputers to produce more Cryptocurrency.
Further, Bitcoin mining is similar to operating a data collection syndicate. The large collection of supercomputers helps mining companies to speculate a 64 digit hexadecimal. Which makes Bitcoin mining output calculations in “Hash”.
It is imperative to note that not all crypto are mineable due to their nature. Mineable coins use the proof of work (PoW) consensus algorithm to develop new blocks on the blockchain. Tokens like Bitcoin, Ethereum, DogeCoin, Lite Coin, Monero, Bitcoin Cash, Ethereum Classic, with over 340 others use the PoW. Crypto powered by the PoW initiative dominates the industry with over 63.46% market dominance. The market cap of these mineable coins sits at $1.37T.
What is PoW
Proof of work (PoW) is an initiative that mandates a reasonable percentage of responsibility to prevent mischievous aims of computing power, such as sending spam emails, hacking and network jamming. Hal Finney propounded the initiative in 2004 to build digital wealth through the idea of “reusable proof of work” using the SHA-256 hashing algorithm.
This decentralized initiative mandates miners to protect the blockchain by solving calculations. Thus, getting new tokens in return. With the PoW, every crypto using the initiative can process peer-to-peer transactions without the aid of a third party. The operation requires high electricity, which makes Bitcoin and Other crypto mining energy-consuming.
How Crypto Mining works
In Crypto, Mining requires the use of supercomputers to acquire and disburse New Bitcoin, and other cryptocurrency. This process also includes the verification of new transactions to produce more crypto. The aforementioned process is much more complicated as summarized in the foregoing. It requires a large, decentralized connection of Supercomputer that substantiates and protects blockchains. Bitcoin mining is more like a guessing game, with the first supercomputer to predict the correct digit grabs the reward. The winner then infuses the blockchain record with the new figure.
Additionally, the process requires a huge supply of electricity to power these supercomputers. Without a doubt, Bitcoin and Crypto mining are rigorous, power-consuming, and require vast resources that are expensive for an individual to manage. In some countries, crypto mining is illegal due to the heavy burden it poses upon the electricity grid.
Furthermore, considering the rigorous processes attached to maintaining the blockchain. Miners are rewarded new coins for their efforts and resources contributed to the course. So it is safe to say, that Crypto mining is a process where miners get rewards for maintaining the blockchain.
To keep the value of cryptocurrency away from inflation, mining activities won’t continue forever. Bitcoin for instance has an overall estimation, there won’t be more than 21 million Bitcoin. According to the calculation, Bitcoin mining will reach its limit in the year 2140. Mining returns are likely to reduce every Four years till 2140. Last year, miners are rewarded with 6.25 bitcoin, and the reward is likely to reduce to 3.125 bitcoin in 2024.
Who are Crypto Miners?
More so, one of the general misconceptions that must be cleared is the tag of “Miners” in Crypto Mining. Many refer to the company or individual who mines the token as miners. However, the ASIC mining chips are the actual miners. They embark on solving various mathematical calculations to mine new tokens.
Lastly, mining organizations, groups, or individuals can bear the tag as well as long as they engage in the activity. Notwithstanding, it doesn’t dispute the status of the supercomputers as miners.