Decoding Crypto Mining: The Intricate Mechanism of Coin Generation
In the cryptosphere, a miner does not go dig a hole in the earth and get out ore
So everybody knows what cryptocurrencies are. But then the question arises where do they originate. Where do they come from??
They are mined out of the system. In the cryptosphere, a miner does not go dig a hole in the earth and get out ore. He is one with a computer which has the mining programme on it. He needs to solve complex mathematical problems (called hash), generated by the system, which once achieved will generate new coins and will be awarded to him as compensation for his effort and resources.
Miners in the cryptosphere are not only responsible for mining new coins but also have the additional responsibility of having to validate transactions on the network and updating the ledger. So, the more the number of miners for a coin faster is the transaction verification process. For this role too the miner is rewarded with a small fee out of the transaction fee of the process.
It emerges that miners receive coins from creating new blocks and also receive fee for verifying transactions.
Because mining takes place on a computer with high configuration (not the normal home used laptops or desktops) they use a lot of energy. This has raised concerns over the past couple of years on the energy consumption. The more powerful a computer the more number of guesses a miner can make per second (hash rate) to solve the mathematical problem.
Higher the computing power the more likely the miner will succeed in solving the problem.
Now Satoshi Nakamoto thought of it all. He saw to it and designed rules for mining such that the more mining power there is on the network the more difficult the mathematical problem becomes. The difficulty level of mining increases as more miners join the process making it more rigorous.
More the miners more difficult it becomes to solve the problem. This strategy of his is labelled the Mining Difficulty. This ensures that on average a new block is added every 10 minutes.
Another guideline that Satoshi included for mining was the reward a miner receives. When it started a miner got 50 BTC for every block. But according to Satoshi’s rule, every 2,10,000 blocks which translates to every 4 years, the mining reward is halved — that is then the reward becomes 25 BTC per block and so on and so forth. Currently the mining reward is 6.25 BTC.
It has become so difficult to succeed that mining pools or mining farms were introduced and explored. Here a group of computers | miners work together ‘pooling their mining power’ towards solving the mathematical problem fast.
If they are successful in mining a block, each miner gets awarded proportionate to the mining power he has put in the pool minus a certain small fee the pool charges for being part of the pool.
The process works thus:
- A miner attempts to solve the mathematical problem generated by the system
- Once he is successful, the programme will determine and group transactions that have to be grouped together to be recorded on the new block
- Then the blockchain ledger is updated with the new block· This new block is then sent to the whole network for others to validate the block, who will validate it and update the ledger with the transactions included in this particular block
Type of computer needed to mine:
Most miners install GPU or graphics processing unit to ensure a powerful processor to carry out more complex problems. 1 GPU power is on average equal to 30 CPUs. Mining pools usually use ASIC mining which is a hardware component specially manufactured to only do mining of blocks.Till recently China was the country with the most mining power.
The 2021 ban on mining in that country has shifted the crown to the west to the US.
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