In 2019, it would be exactly ten years since cryptocurrencies have been in existence. Cryptocurrencies aren’t exactly a fad, but it isn’t a popular practice as well. However, a cryptocurrency related practice which is gaining acceptance in the society is cryptocurrency mining. Today, we are seeing the evidence of this practice making it into the society by the increased prices of graphics cards worldwide. These graphics cards are increasingly becoming scarce as people build their mining rigs to make money of cryptocurrency.
Cryptocurrency mining doesn’t just revolve around the use of graphics cards. Today, there are PC games that allow you to mine cryptocurrencies even if you are not in the system. Then, you can use the cryptocurrency you mined to redeem new games. In fact, you can think of this as something similar to Pokémon Go where you can catch new Pokémons. The only difference is you get to hunt for cryptocurrencies.
This seems like the right time for us to explain what exactly is happening in the world of cryptocurrency to anyone who is thinking about joining this practice. If you’re interested in cryptocurrency mining, it is going to be a challenge. The nature of cryptocurrencies makes it a highly mysterious area that we have not explored enough. The moment you think you know enough about cryptocurrency, there is an exponential amount of growth in the technology and systems surrounding the space happening simultaneously.
Cryptocurrency mining is a highly complicated task. So, tread with caution, especially when you are entering this space because this practice comes with a risk. If you want to mine cryptocurrencies, you can mine them using your PC, but you can also build specialized mining rig. Without further ado, let’s get started on this guide.
What exactly is cryptocurrency mining?
Every day, there seems to be new information about cryptocurrencies. You can scroll through your Facebook feed, and there will be news about cryptocurrencies. In this space, there are a lot of proponents and naysayers, which helps to create a healthy discussion in the space. The reputation of cryptocurrency has improved significantly since it was first used to assist darkweb transactions.
The profitability of Bitcoin has made it a highly popular cryptocurrency. The underlying technology behind it is blockchain. We are going to talk more about blockchain in the upcoming sections of this article, but the main thing about blockchain is that it functions as a distributed ledger which records every transaction that occurs within the network – publicly.
If we were to look to Bitcoin as a benchmark, it would make sense to do so because if the price of Bitcoin goes down, you can see a similar decrease for other parts of the cryptocurrency market. It is used to determine the profitability of alternative coins below it, especially those that utilize similar networks and blockchain like Bitcoin itself. On the value per coin level, there are no other alternative coins that can come close to the level that Bitcoin has. There are over 1500 alternative coins into the cryptocurrency market, so it shows how powerful Bitcoin is in this space.
In this article, we won’t go into detail about the history of Bitcoin or key distinguishing features of the cryptocurrencies. However, we do want to point out that you can’t mine Bitcoins using a laptop anymore. Unfortunately, you will have to purchase expensive hardware which is called ASICS. If you can’t afford to buy these, you can combine your hardware computing power with other miners in what is called in a mining pool and share the cryptocurrency reward accordingly. When it comes to mining, people often misunderstand that it’s simply the process of finding coins. However, the process of mining is far more complex than that.
Hence, we need to understand the network which makes it necessary for people to mine Bitcoin’s. Let’s learn more about blockchain.
So, what is blockchain?
At its core, blockchain is the foundation of Bitcoin and many other cryptocurrencies. For hundreds of other cryptocurrency coins, their existence relies on the concept of the blockchain. Cryptocurrency was designed to be decentralized and highly secure. Hence, every transaction will be encrypted. Once the transaction has been encrypted, it will add to something called a block until a fixed number of transactions has been recorded. Then the block will get added to something which is the blockchain. This information is publicly available.
Despite being publicly available, no one knows who executed those transactions which can be a good and bad thing. However, one must acknowledge that privacy is the main feature of cryptocurrencies and is the reason why people supported the industry in the first place. As these blocks are heavily encrypted, one can say that this is the reason why the blockchain infrastructure cannot be easily manipulated. These complicated maths puzzle can only be solved by powerful computer hardware.
To put it in simpler words, mining is a process that requires the individual to solve maths puzzles on the block. As a miner, you will have the responsibility to verify strings of action to determine whether they are true or false. Essentially, this process helps keep the infrastructure of a cryptocurrency intact. This is why most cryptocurrency developers are concerned about the community surrounding the cryptocurrency rather than people who buy or sell the cryptocurrencies. This is because the maintenance of the network and the process of mining is what helps to keep the infrastructure ongoing.
Next, we reveal the reason why cryptocurrency mining is becoming such a popular practice. People are financially motivated to mine cryptocurrencies. The reward for mining cryptocurrency is that you will receive the payment regarding the particular cryptocurrency. For example, if you are mining Bitcoins, you will receive your payment in Bitcoin. The payment will be depending on how much your hardware has contributed to solving the puzzle.
Real life illustration of blockchain: Google Docs
Do you remember a time where you were in a group project, and all of you have the responsibility to overlook each other’s work? However, it is difficult to do so because one person would have to edit the document first and send it to the other person. This takes time. In fact, banks are also challenged similarly. No two owners can update the same record at the same time. This is how banks maintain their balances in transfers.
However, Google Docs changed the game for document editing. Using this invention, it is possible for different parties to access the same document at the same time. On top of that, the document interface will be the same for everyone who accesses it.
Besides being used for financial transactions, blockchain can also be used for many other things. As it is a highly transparent technology, many industries will find it useful. In fact, consumers will also gain confidence in an industry that utilizes this ledger because it will create a more equitable world for everyone. It is entirely possible that a blockchain infrastructure in the future can provide a unique digital identity to physical objects. This is a concept that NEO which is one of the top 10 cryptocurrencies in the world is exploring.
Getting started with cryptocurrency mining
If you want to mine cryptocurrencies using your computer, you will have to use specialized hardware which combines the use of graphics cards and your CPU. On top of that, you have to download specific software that will help you to mine your desired coin. Then, you need to edit a text file which provides details about your wallet address and the name of your work PC.
You will find that the software will typically work on Windows and Linux systems. If you mine using a non-Windows system, this is much harder. The moment the blocks are sold and coins are generated, it will pay the miners directly to the address of the wallet provided.
In this article, we have given you a basic view of cryptocurrency mining. The truth is, there are still a lot more to discover that the world of cryptocurrency mining. We are risking oversimplifying things especially because mining itself is a complex landscape. As miners, you can independently verify transactions on the blockchain and create more coins in circulation. In fact, miners play an essential role to ensure that the network keeps running and this will increase the global supply of coins.
Some people mine cryptocurrencies because they truly believe in the potential of the technology. However, most people do it because it is financially rewarding to do so. Whatever the reason that you are interested in mining, we hope that this article has been helpful to uncover some things about this area.