You must be thinking that we are out of our minds, to be mentioning mining which is a process of extraction of minerals in a space related with blockchain and cryptocurrency! Well, to your surprise, Mining is very much correlated with cryptocurrencies and is an essential part of blockchain transactions.
What is mining?
It’s not as straight forward as mining of coins. Mining is a process of verifying and validating blockchain transactions for a specific cryptocoin and receive a monetary reward for the computational effort.
“Mining” is performed using sophisticated hardware that solves an extremely complex computational math problem. The first computer to find the solution to the problem receives the next block of bitcoins and the process begins again.
Blockchains require a protocol for achieving a decentralized consensus to verify the integrity of new blocks, and in crypto mining, this consensus mechanism is proof-of-work (PoW). By contributing computational effort to validating transactions, miners receive a predefined amount of the coin for their proof of work.
The protocol ensures the integrity of blockchain transactions and rewards miners for their expenses and effort, but it also deters threat actors who hope to manipulate the cryptocurrency. Crypto mining requires extensive processor power, creating competition and a barrier to entry for prospective nodes and mining rigs.
How to start mining?
Mining cryptocurrencies requires computers with special software specifically designed to solve complicated, cryptographic mathematic equations. In the technology’s early days, cryptocurrencies like Bitcoin could be mined with a simple CPU chip on a home computer. Over the years, however, CPU chips have become impractical for mining most cryptocurrencies due to the increasing difficulty levels.
Miners are rewarded with a new coins and also take home the transaction fee.