Crypto Mining: What Is It and How Is It Done?
Crypto Mining is the production of cryptocurrencies through hardware and software. At the same time, registration and confirmation of crypto money transfers are also included in mining. Each time a brand-new unit is produced, the issue degree of fixing the ensuing blocks increases. Therefore, computer systems with very effective processors are required for mining.
Crypto mining basically serves two important purposes:
- If we take the example of Bitcoin, mining is the process of verifying and storing transaction information distributed within the Bitcoin network in the blockchain.
- Mining creates a secure, tamper-proof consensus ecosystem for Bitcoin nodes to identify whether the published transaction is valid or not. A Bitcoin transaction must have at least six network confirmations to make it expendable.
Just like a central bank prints money and issues new notes, they create the money supply for Bitcoin by mining. At the end of the crypto mining process, they generate new coins. However, they have designed the reward to simulate diminishing returns, such as mining precious metals.
Miners basically confirm new transactions and record them in the global ledger, the blockchain. Each new block containing transactions that took place within 10 minutes of the creation of the last block is “scraped”.
These transactions are then added to the blockchain. A transaction is said to be part of a block and confirmed when added to the blockchain. Bitcoin buyers can only spend Bitcoin when the transaction is confirmed. However, all this requires a significant amount of computer computing power.
What Do Miners Earn from Crypto Mining?
Miners receive two types of rewards for the security they provide for crypto mining:
Transaction fees for all transactions that are verified and included in the block.
- Each transaction typically includes a transaction fee. This they receive in the form of a surplus of Bitcoin between the inputs and outputs of the transaction.
- The winning Bitcoin miner gets the right to receive extra Bitcoins for the transactions included in the winning block.
New coins created in each new block are block rewards.
- The maximum amount of newly created Bitcoin that the miner can receive from a block is programmed to be halved every 4 years.
- In January 2009 the reward was 50 Bitcoins per block. This was later reduced to 25 Bitcoins per block in November 2012 and 12.5 Bitcoins in July 2016.
- With the halving in May 2020, the reward dropped from 12.5 BTC to 6.25 BTC. By the same formula, the rewards will continue to decrease until 2140.
How Can You’re Mining and 4 Different Options for Mining
You can do crypto mining in multiple ways. These methods are:
CPU mining; is the oldest mining method that can be done with well-equipped and high-processor computers. It consumes a lot of energy and carries risks in proportion to the life of the machines.
GPU mining; is a more developed, efficient, and economical version of the CPU and is the most preferred mining type. You can apply it with equipment such as more than one video card, a well-equipped processor.
Cloud mining; is the latest technology in mining. In this method, an agreement is reached with the person or organizations engaged in GPU mining, and their crypto mining functions are leased. In the mining system, which is rented for the specified time period, the costs of the transaction at the end of the period are reduced, and they earn a certain amount of crypto money.
ASIC mining; is the most powerful mining method. Anyone using this method can generate huge amounts of cryptocurrencies, resulting in unfair distributions. For this reason, it is not preferred and even banned.