Blockchain and Cryptocurrency Beginner - Cryptocurrency Mining and How it Works
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Before we begin talking about what cryptocurrency mining is all about, especially for people who are new in the cryptocurrency world and who don’t know what it is, it is important to first understand what cryptocurrency is… cryptocurrency is basically a digital currency that is similar to the physical currency we use. As opposed to the physical currency, cryptocurrency like bitcoin, ethereum do not have a bank or a central entity that controls it and decides what happens… its strength is that is decentralized and on the blockchain, meaning that there is no central authority or central entity that controls or alter it. In order words, users have full control of their cryptocurrency assets by keeping them in a cryptocurrency wallet and having full control of their keys.
Mining in the cryptocurrency world or cryptocurrency mining is a term that isn’t new to the cryptocurrency world, in fact cryptocurrency mining is as old as cryptocurrency itself and is as old as bitcoin which is the first cryptocurrency to be created. Whenever the term cryptocurrency mining is talked about, bitcoin is the first name that comes to mind because it was the first cryptocurrency to utilize mining. Cryptocurrency mining is basically the process of minting new cryptocurrencies and validating transactions from the blockchain.
How Cryptocurrency Mining Works
Cryptocurrency mining that utilizes proof of work basically means the process of mining (minting new coins and validating transactions) using sophisticated hardware, high computation power and specialized softwares to validate transactions on the particular blockchain network. Bitcoin is the king when it comes to blockchains and cryptocurrencies that utilizes proof of work mining. Cryptocurrency miners receive rewards for making use of these required tools to solve complex mathematical problems and also validating the transactions for the blockchain.
A clear example of proof of work mining is bitcoin mining which is one of the most popular when it comes to cryptocurrency mining. The way proof of work mining work is that miners who already have the required tools and computational power can solve the complex mathematical problems and the first to solve these problems gets rewarded. This means that the more computational power and better the equipment, the faster it is to solve the complex problems and create the next block.
