How Crypto Mining Works?
Crypto Mining is a process by which crypto traders earn more digital currency in the form of rewards. This article explains how Crypto Mining works, its rewards, and who can do it by explaining the process.
As the name suggests, Crypto Mining is the process by which new cryptocurrency is produced and entered into digital circulation. The procedure isn’t that simple as it sounds; instead, it involves solving extremely complicated computational problems through high-performance computers without upsetting the blockchain ledger balance.
By the manner in which it is done, one can say it is almost like an entrepreneurial exercise inside the crypto-verse that every cryptocurrency dealer wants to undertake, but isn’t always equipped with the patience or knowledge to tackle it. Crypto Mining, hence, is an expensive and painfully long activity that lures investors and traders alike for the exclusive rewards attached to it.
How to perform Crypto Mining
Those starting out in the world of Cryptocurrency must be wondering what the hype around Crypto Mining is about, even though it is a tedious, sporadic and costly job. Ask a Crypto trader the same question, and you’ll know how rewarding it is. Rewards, there it is. Crypto Mining attracts hundreds of thousands of traders because of its highly-prized rewards in the form of “Crypto Tokens” or rewards. The rewards for Crypto Mining decreases by half alternately in 4 years. As of 2020, the reward for Crypto Mining a “block” was $111,875 (6.25 x 17,900).
Crypto Mining is the “audit” version of digital currency where Miners act as Auditors who perform the task of verifying the legitimacy of Cryptocurrency transactions. Crypto Miners work for preventing counterfeit or “double spending”, i.e., crypto traders illegally spending the same currency twice, for two different purposes. Counterfeit in Crypto Mining occurs when the currency holder makes a duplicate of the digital currency and sends it to a dealer, buyer or another party while retaining its original form. So Crypto Mining is analogous to checking transactions to ensure they haven’t been illegitimately used to pay or transfer into a dealer’s Crypto wallet.
The process of Crypto Mining works like solving a complex mathematical problem through computational coding, similar to guesswork. Miners attempt to indulge in guessing a 64-digit hexadecimal number (“hash”) which should be either less than or equal to the hash targeted. In the process, Crypto Miners verify Cryptocurrency transactions equating to the size of 1 MB, which is traditionally known as a “block”. 1 MB of a transaction can be as little as one transaction or a few thousand, depending on how much data the transaction weighs. If a miner is successful at the 1 MB verification, they would qualify for the reward. Verifying the size of 1 MB currency transactions makes a miner eligible to get paid out in more coins as the reward. However, not all miners who verify the transaction will get rewarded.
Who can start Crypto Mining
Don’t jump off your seat yet; it’s true that Crypto Mining is like guesswork, and even then, not all miners who verify the transaction will get rewards. So where is the catch when even after all the toiling in verifying transactions, doesn’t fetch you a sure reward?
There are two preconditions one needs to meet to get rewarded:
- First, the miner must verify ~1MB worth of transactions; this is the easy part.
- Second, the miner must be the first to solve the computational puzzle, and this, the hard part, is solely dependent on luck. When the miner claims as having verified the block, they are to claim rewards by attaching a “proof of work”.
The fact that Crypto Mining is guesswork has both its pros and cons. One can achieve the right guess on the first try, whereas several tries may fail if the correct guess isn’t made. Therefore, it isn’t as easy as it sounds. The total possible guesses for each problem may be in trillions, so it is really arduous work, and that tells us that a miner needs to be incredibly adept in computing skills. For successful Crypto Mining, one must have a high “hash rate”, thus revealing that any Crypto trader with great potential in computing can start mining and earn billions of dollars in cryptocurrency. Cryptocompare is an online calculator that determines the amount of currency a miner can earn at a particular hash rate.