So you’ve heard of cryptocurrency and, as a result, you’ve heard of something called crypto mining too.
It’s a strange concept at first and it doesn’t really make sense. Like seriously, how can someone use their computer to mine? And how exactly does mining with a computer generate income? It all starts to come together when you read a coherent explanation.
Don’t worry, it’s actually quite easy to understand the basics of mining and how it works. Sure, it gets pretty technical when you dive deeper, but for now we just need to know what crypto mining is and how it all works.
What is crypto mining?
Crypto mining is a type of work that computers carry out to maintain a decentralized network. Miners are computers set up to audit the transactions of a cryptocurrency. Most commonly miners are mining Bitcoin.
Miners are important because they allow the network to function while maintaining network integrity. Crypto miners are responsible for vetting transactions and, when they verify them, writing them to the network into a block.
Without miners, networks like the Bitcoin network wouldn’t function. Cryptocurrencies that require mining use a consensus mechanism called Proof of Work (PoW). What this means is that in order to reach an agreement on the transactions, also known as ‘conesnsus’, the transaction authenticators have to carry out work and then prove that they have done the work.
The ‘work’ refers to the computational effort that miners have to carry out in order to verify a block.
What do crypto miners have to do?
Miners all across the world compete to process the next transaction, because if they do they receive a financial reward, paid in the cryptocurrency they are mining.
Most often, miners compete to be the first to find a random number, known as a ‘nonce’. The winning miner receives the right to be the latest blocks authority and receives remuneration.
PoW is based on an economic reward structure. The winning miner receives an economic reward, which incentivizes people to mine. As a result, this protects the network because computer power and electricity is not free. The more miners there are competing, the harder it is to compete, and the more expensive it would be to maliciously attack the network.
Crypto mining is a process carried out by computers to maintain a decentralized network. The successful miners are able to earn a reward, paid in cryptocurrency.