Crypto Mining: Unpacking the Concept of Cryptocurrency Mining and How Digital Currencies are Generated and Secured
Cryptocurrencies have come a very long way since their inception back in 2008. Since the monumental launch of Bitcoin, which still remains the most popular crypto and blockchain network, this industry has only become even more complex. All transactions that are launched on the blockchain must be recorded and transcribed, ensuring that they’re verified onto that blockchain network’s ledger.
At present, there are a number of different ways that blockchain ecosystems can verify their new transactions. Two of the most popular consensus mechanisms are known as proof-of-work and proof-of-stake. The former is used by systems like Bitcoin, while the latter is used by other huge names in this industry, like Ethereum.
Out of these consensus mechanisms, proof-of-work is one that has become synonymous with the process of cryptocurrency mining. In this article, we’ll dive into this practice, explaining what crypto mining is, why it’s such an important part of the blockchain ecosystem for all, and how companies like Metatime are making this consensus model even more efficient over time.
Let’s dive right in.
What Exactly Is Crypto Mining?
The most common cryptocurrency that is associated with mining is Bitcoin, being the first crypto to use the POW consensus mechanism. Using bitcoin as an example, mining is a process through which new bitcoin currency is produced and entered into global circulation. While this process does refer to the concept of extracting, the word ‘mining’ actually has more to do with the complex process that goes on when producing new Bitcoin.
In this context, mining is actually the process of computers solving increasingly complicated mathematical problems. When a computer is able to finish the set problem, it will liberate the next block of bitcoin, starting the process over again. Not only does this create the next block of information on the blockchain ecosystem, but it also increases the total number of circulating currencies.
The first mining computer that solves the equation is the one that gets rewarded with Bitcoin. Most of the time, this isn’t actually a singular person. Rather, many users come together from across the globe and share the power of their devices. Depending on the energy that was used to mine the currency, it is then fairly split across all parties that contributed to its mining.
Why Do Cryptocurrencies Need Miners?
Whenever a transaction is made on any blockchain system, it enters into a long queue of other transactions that are waiting to be verified. On a proof-of-work system, one that uses mining, the process of mining a new block is how these transactions are verified. Instead of just being paid for uncovering more bitcoin, miners are really being rewarded for validating transactions and contributing to the ongoing work of that specific blockchain network.
Validating transactions is vital within any financial system. If there was no need to ensure that every single transaction made was honest, it would be incredibly easy to defraud the entire blockchain system. For example, if someone sends through transactions with the currency that they don’t currently have, without block validation, there is nothing to stop them from earning from these fraudulent claims.
Miners hold up the blockchain proof-of-work ecosystems, ensuring they can run smoothly. With the high price of a Bitcoin, having ranged anywhere from its highs of over $65,000 to currently circling around $20,000, there is a huge incentive for miners to get involved.
Bitcoin miners only need a crypto wallet, mining software, and mining hardware (a powerful computer) to get started, making this something that many people around the world are turning to in order to make some extra income.
With this high level of competition, cryptocurrency mining has almost become a parallel to traditional data centers, with huge specialized computer facilities being created specifically to mine bitcoin.
Will Cryptocurrency Mining Always Be Popular?
The popularity of crypto mining typically has a direct correlation to the current price of bitcoin itself. While bitcoin is a common currency that is rewarded from mining, it’s also an industry-wide indicator of swings in the market. If bitcoin starts to fall, other cryptocurrencies will also typically fall – and vice versa.
With bitcoin having the power it does, crypto mining will remain a popular activity as long as the main currency continues to hold value. Even when Russia and China banned cryptocurrency mining, it did not take long for centers to spring back up across these regions.
That said, some companies are offering alternative methods of getting involved with cryptocurrency mining that is more conducive to a stable long-term ecosystem. For example, Metatime offers MetaMining, which is a Proof of Meta consensus mechanism. This takes a hybrid approach to mining, allowing blockchain ecosystems to access a more diverse decentralized structure.
Both for users and for blockchain ecosystems, this is a much more effective method of running mining operations. As ecosystems around the globe attempt to scale and grow, the ability of MetaMining to streamline the process will only help to further speed up the growth of the world of blockchain.
Cryptocurrency mining is one of the central ways that people have earnt cryptocurrency, dating back right to the foundation of the Bitcoin network. Although there are now several other consensus mechanisms, Bitcoin’s use of POW ensures that there will always be a strong market for cryptocurrency mining.
As this industry continues to scale, players like Metatime are ensuring that entry into cryptocurrency mining is easier than ever before. As accessibility increases, the number of miners that help to sustain blockchain ecosystems will also grow. With projects like these in the works, there is a very bright future for the cryptocurrency mining industry.