Mine with us: what is it about?
Cryptocurrency mining can be seen as a dark magic.
Everyone says that they know what are you talking about, but in the end, most of them have to check the term in the Internet.
Let’s try explaining it in the easiest possible way.
Mining – generating new cryptocurrency coin by using special software to solve cryptographic problems, making transactions possible and secure, collecting fee as a reward.
How does it work?
Cryptocurrency mining is a process of solving mathematical/cryptographical problems by using computer hardware. After solving specific cryptographical problems, there happens a creation of new blocks and addition them to the blockchain. New block in a chain has to be checked by another miner, what makes this system secured and trustworthy.
Every new block added, is given to every participating user. That means if anyone would change data, in that particular block, he would also have to change the same block in every hardware which keeps that data. Blockchain is a huge ledger of blocks. It can be used to find any transaction between any cryptocurrency address. Every new block in the chain contains information about previous one, so as I wrote earlier, it is impossible to change anything in the chain after it is accepted.
Who is checking it and how?
Here comes the miner. What is his job? When another block of information is created, they put a mathematical pattern to it, changing to a shorter sequence of letters and numbers – hash.
Hash is a great way to store information. Not only because it is impossible to find out what data the hash is cointaining by looking at it. But also it is simple to create a hash from an amount of data. Every hash is different and unique. It means that if you change one letter, the whole hash will be distinct. Miners don’t just make hash from information that block contains, but also from the previous block hash. That process makes blocks legit.
Miner is rewarded 12.5 BTC for making new block at present time. The reward is halved after every 210.000 blocks. Next drop will be after about 128.000 blocks, so in fact, it will happen in less than three years from now.
How can I start?
To be honest, mining right now is not as profitable as it used to be. In fact, you need professional equipment (because of increasing difficulty with every block) that costs a lot of money. That’s why you need to calculate profits to expenditure. Check if it’s profitable for you here.
The first step is downloading a client, let’s use Bitcoin Core as an example.
After downloading the full Bitcoin client, you need to download Bitcoin mining software. As an optional and good idea you can choose mining pool, otherwise you can wait a long time before solving first block.
What exactly is mining pool? It’s an association of miners who share profit from rewards. There are pros and cons of pools, but right now if you don’t have a cooling room with a lot of ASICs – it’s not worth it to be a part of a pool.
In mining pool everyone shares their processing power, to solve cryptographical problems and add blocks to the chain. That’s why, the reward is also split for all participating users.
This is the first article about mining cryptocurrencies. What equipment use, how to join mining pool and more about cloud mining in next ones.
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