Miners: 6 Great Facts About Mining Cryptocurrency
Every wonder how to become a miner?
And no, not a miner that searches for precious jewels on land, but a miner that solves complex mathematical problems and is rewarded with free crypto gold? If so, you’re in the right place!
The Mining Practice
Though land mining and crypto mining share very few similarities, the comparison still holds. Crypto mining involves a lot of luck, being at the right place at the right time. While the machinery used by crypto miners, the rig, also shares the same name as those used by forty-niners.
However, we’re getting a little ahead of ourselves. Now, what is mining?
Mining is the practice of computers solving mathematical formulas to create new Bitcoin and other cryptocurrencies. The first coder to decipher each formula can authorize a transaction between a buyer and seller of crypto. In exchange for your hard work, you’ll be given a few tokens of this digital currency.
This practice also verifies transactions on the cryptocurrency network and adds them to the public ledger, known as the blockchain.
To understand a blockchain better, you can compare it to a database. A database is just a collection of information supporting a larger task. For instance, a payroll database keeps track of all the employees, their hours accrued, and their salaries. Likewise, a blockchain consists of large amounts of information under categories called blocks. These blocks are connected to more blocks, hence the name “blockchain.”
However, unlike an actual database, the information in a crypto ledger is not centralized. When Satoshi Nakamoto created Bitcoin (the first cryptocurrency), he wanted the network to be democratic, so the information is accessible to anyone who uses it.
Thus, once a miner completes and verifies a transaction, anyone within the crypto ecosystem can view his work.
….However, before completing a transaction, a miner must first complete a proof of work.
Proof of Work
During the creation process for crypto, Nakamoto needed to develop a means of verifying transactions without involving a third party. He later utilized POW to help miners and other users come to a consensus on which transactions are valid.
How Does Proof of Work Work?
Every 10 minutes in the network, miners expend computational resources to submit valid blocks that are within the network’s regulations. To do so, miners need to first find a nonce (i.e. numbers used only once) before a block can be added to the chain.
(Little known fact: Proof of Work was originally created as a solution to spam email.)
The Cost of Mining
Mining is so expensive because competition has increased exponentially since the creation of Bitcoin in 2008 and high-performance computers are required to mine crypto.
At the same time, the amount of energy used to mine is huge, so you’ll see the cost immediately once you start mining, as well as at the end of each month on your energy bill.
Still, don’t let the cost deter you because the profit can potentially outweigh the cost. Look at Ishaan Thakur and his sister, Aanya, they both earn $30,000 a month mining crypto, and they’re not even out of highschool.
How You Can Start Mining
All you’ll need to mine crypto is a high-performance computer or a rig, a wallet to mine various types of cryptocurrencies, and once you’ve completed that, join a mining pool to increase your profit.
Mining pools are groups of miners that maximize their mining capacity by combining resources. Profits accrued are usually distributed evenly amongst miners. Thus, these pools can allow for more money to be made with less effort.