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One thing that gets associated with cryptocurrency frequently is the term “mining”. To best understand what it is and why it matters, it is best to approach this topic in a simple way, as it can get rather complicated. This article will delve into the mining process behind Bitcoin (BTC), and use that to extrapolate how mining works with other cryptos.
To start, what is “mining” referring to? In the physical world, mining is the process of extracting materials from the earth (and someday asteroids) for whatever application the material is necessary for. In the world of Bitcoin (BTC), mining is the process used to develop the blockchain and extract bitcoins. How does this process develop the blockchain? Well, anytime a request for a transaction is sent to the blockchain network, a Bitcoin (BTC) miner’s task is to verify the legitimacy of that transaction. This is called a confirmation; depending on the size of the transaction it may require none or multiple confirmations. Once these “miners” have verified 1 MB (1 “block”) of transactions, they are rewarded in Bitcoin (BTC) that is added to the blockchain. The limit of 1 MB is a topic of debate in the crypto world. They remain relatively anonymous in this process, which is decentralized as is the nature of Bitcoin (BTC) and other cryptos. So why isn’t everybody doing this if you can earn Bitcoin (BTC)?
Well, the process, with how large the Bitcoin (BTC) network has inflated, requires massive amounts of computing power. The hardware needed requires investing thousands in order to efficiently mine. It is possible, with enough know-how; there is simply lots of know-how needed. Crypto-miners were actually most likely responsible for the GPU shortage experienced this year. So how does this apply to all cryptocurrency?
The process is relatively the same amongst cryptocurrencies that utilize a blockchain; this way it is significantly more feasible for the average person to mine a crypto with a much smaller market cap. Understanding this process and why it’s important may prove advantageous to an individual interested in a particular cryptocurrency and getting started with mining, similarly to individuals who were mining Bitcoin (BTC) in 2014.
Sources:
Tuwiner, Malcolm Cannon Jordan. “7 Reasons Bitcoin Mining Is Profitable and Worth It (2021).” BuyBitcoinWorldwide, BuyBitcoinWorldwide, 7 July 2021, www.buybitcoinworldwide.com/mining/profitability.
The Economist. “Crypto-Miners Are Probably to Blame for the Graphics-Chip Shortage.” The Economist, 18 June 2021, www.economist.com/graphic-detail/2021/06/19/crypto-miners-are-probably-to-blame-for-the-graphics-chip-shortage.
PCMag. “Definition of Bitcoin Confirmation.” PCMAG, 2021, www.pcmag.com/encyclopedia/term/bitcoin-confirmation.
“How Does Bitcoin Mining Work?” Investopedia, 2021, www.investopedia.com/tech/how-does-bitcoin-mining-work.
Kobruseva, Olya. “Gold Round Coin Beside Gold Round Coin.” Pexels, Pexels, 16 June 2021, www.pexels.com/photo/wood-writing-time-shopping-8358115.
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