Mining 101

What is Cryptocurrency Mining?

Cryptocurrency mining can sometimes be a complex process to understand and for most people, they understand it as the “finding digital coins”. Yes, this ultimately is the final result, however, the steps involved to get that coin are a little more complex.

Every single coin mined relies on a concept known as the blockchain. As suggested by its name, cryptocurrencies were designed to be decentralized, secure and unalterable allowing each transaction to remain encrypted. Once a transaction occurs it is then added to a “block” which is then added to the chain. These two components are known as the blockchain which allows transactions to remain anonymous and decentralized. These transactions are publicly available and are often referred to as a distributed ledger. 

Since these blocks are so heavily encrypted these so-called “math puzzles” require high computing power to be solved. This is where your computer hardware comes in to play, specifically your graphics cards and your computer processing units(CPU).

Cracking these blocks and adding them to the blockchain is roughly what mining is. Miners –  which are your computers that contain the above-mentioned parts –  are responsible for verifying transactions. The reward for successfully mining is a payment in that blocks coin. This payment is based on how much the miner’s hardware contributed to solving that puzzle.

Once a block is solved the coins are released and new block opens up. Each time a new block is opened up the difficulty of mining increases requiring more computing power. That is why we now see non-traditional computers called ASIC miners that are specifically built to meet the demand of the ever-increasing difficulty of solving these puzzles. The difficulty scales with the number of machines mining, meaning if there is an abundance of machines mining the difficulty will only increase but if there is not a lot then it becomes easier.