crypto mining (or ?cryptomining,? in the event that you?d prefer) is a popular topic in online forums. You?ve probably seen videos and read articles about Bitcoin, Dash, Ethereum, and other types of cryptocurrencies. And in those bits of content, the topic of cryptocurrency mining often comes up. But all this may leave you wondering, ?what’s Bitcoin mining?? or ?what’s crypto mining??
The bottom line is, cryptocurrency mining is a term that refers to the procedure of gathering cryptocurrency as a reward for work that you complete. (That is referred to as Bitcoin mining when discussing mining Bitcoins specifically.) But why do people crypto mine? For some, they?re searching for another source of income. For others, it?s about gaining greater financial freedom without governments or banks butting in. But regardless of the reason, cryptocurrencies are a growing market for technophiles, investors, and cybercriminals alike.
n a more technical sense, cryptocurrency mining is really a transactional process that involves using computers and cryptographic processes to solve complex functions and record data to a blockchain. In fact, there are entire networks of devices which are involved in cryptomining and that keep shared records via those blockchains.
It?s important to recognize that the cryptocurrency market itself is an alternative to the traditional bank operating system that people use globally. So, to better understand how crypto mining works, you first need to comprehend the difference between centralized and decentralized systems.
Traditional Banks Are Centralized Systems
In traditional banking, there?s a central authority that controls, maintains, and updates a centralized record (ledger). Which means that every single transaction has to go through the central bank operating system, where it?s recorded and verified. Plus, it?s a restricted system ? only a few organizations (banks) are allowed to connect to the centralized banking system directly.
Cryptocurrencies Use Decentralized, Distributed Systems
With cryptocurrencies, there?s no central authority, nor is there a centralized ledger. That?s because cryptocurrencies operate in a decentralized system with a distributed ledger (more on this shortly) referred to as blockchain. Unlike the traditional banking system, anybody can be directly linked to and take part in the cryptocurrency ?system.? You can receive and send payments without going right through a central bank. That?s why it?s called decentralized digital currency.
But additionally to being decentralized, cryptocurrency is also a distributed system. This implies the record (ledger) of most transactions is publicly available and stored on lots of different computers. This differs from the original banks we mentioned earlier, which are centralized systems.
But with out a central bank, how are transactions verified before being added to the ledger? Instead of using a central banking system to verify transactions (for instance, making sure the sender has enough money to make the payment), cryptocurrency uses cryptographic algorithms to verify transactions.
And that?s where bitcoin miners come in. Performing the cryptographic calculations for every transaction adds up to a great deal of computing work. Miners use their computers to perform the cryptographic work required to add new transactions to the ledger. As a thanks, they get a small amount of cryptocurrency themselves.
How Cryptomining Works (And an In-Depth Look at Blockchain)
The bottom line is, crypto miners verify the legitimacy of transactions so as to reap the rewards of these work in the form of cryptocurrencies. To understand how most cryptocurrency mining works in a more technical sense, you first need to understand the technologies and processes behind it. This includes understanding what blockchain is and how it works.
The first thing to learn is that two things are central to the concept of blockchain: public key encryption and math. While I?m definitely a fan of the initial, I?ll admit that the latter isn?t my strong suit. However, public key cryptography (aka public key encryption or asymmetric encryption) and math go together in blockchains like burgers and beer.
Traditional cryptocurrencies such as for example Bitcoin work with a decentralized ledger referred to as hardware blockchain. A blockchain is a series of chained data blocks which contain key bits of data, including cryptographic hashes. These blocks, which are integral to a blockchain, are groups of data transactions that get put into the end of the ledger. Not only does this add a layer of transparency, but it also serves as an ego inflator when people reach see their transactions being added (chained) to the blockchain. Though it doesn?t have their names listed on it, it often still evokes a feeling of pride and excitement.