Cryptocurrency is one of the hottest topics discussed on the Internet. The cryptocurrency ecosystem is said to be growing at an exponential rate as people are investing head over heels.
If you want to own them, you have to loosen your purse strings.
But you might have heard about people earning cryptocurrencies as rewards by a method called Cryptocurrency Mining.
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What is Cryptocurrency Mining?
Cryptocurrency mining is the process of validating transactions on the Blockchain and gaining rewards in the form of cryptocurrency.
Mining is basically a network of computers called Nodes interconnected with each other to validate the blocks on the blockchain. Once a transaction is initiated on the blockchain, all the nodes compete within themselves to solve the complex mathematical puzzles in order to validate blocks. The node which successfully accomplishes the task is rewarded with a cryptocurrency of the respective blockchain.
The mining process terminates illicit activities and empowers all users on the blockchain network to audit the transactions.
How does Cryptocurrency mining work?
The cryptocurrency, in 2009, was created specifically to be regulated by people using it. But financial transactions have to be validated to prove their legitimacy and transparency. This validating procedure should avoid loopholes such as double-spending by duplication of assets, which led to the development of an algorithm to reach a common consensus.
When a cryptocurrency transaction is made, it sends data to nodes(an electronic device and part of the blockchain) about the cryptocurrency being spent. This transaction is to be verified if it’s authentic or not.
An algorithm based on Proof Of Work is assigned to solve mathematical problems called Cryptographic hashing Function on logic solving circuits, such as a CPU, GPU, application-specific integrated circuits(ASIC).
These mathematical functions are nothing but data of transactions done by users. Hence transactions are validated to reach a common consensus, recording the transactions on a distributed ledger. The distributed ledger is called Blockchain, and the whole process is called Cryptocurrency mining.
If all nodes reach a consensus that the transaction was authentic and the block contains Proof-of-Work, the transaction is accepted. Proof-of-Work is the process of finding a unique number called Nonce.
That’s how Cryptocurrency mining works. But how can I do it you ask?? Let’s look into that in the next section.
What are the requirements for mining?
During the initial years of mining, you should have a capable computer. But as more and more miners grow the computational power required to solve the hash function also starts increasing.
To mine competitively, miners must now invest in powerful computer equipment like a GPU (graphics processing unit) or, more realistically, an application-specific integrated circuit (ASIC). These can run from $500 to tens of thousands.
Some miners—particularly Ethereum miners—buy individual graphics cards (GPUs) as a low-cost way to cobble together mining operations. As you can guess, many miners are in it as much for the fun and challenge as for the money.
But is it rewarding??
Depending on the time you start mining, you may be able to earn better. As the number of quantities of cryptocurrencies increases, the more difficult mining gets!!
Crypto-Jacking is the method of gaining unauthorized access to computers, and electronic devices of others, to use their computing power for malicious mining of cryptocurrency.
The primary intent of Cryptojackers is to use the CPU or GPU power of the electronic devices to run their mining script. The output of the script(proof-of-work & nonce) is redirected to the clouds or servers which are controlled by the cyber-criminals.
They collect the cryptocurrencies from the mining done by other electronic devices. This might also be used to gain unauthorized access to cryptocurrency owned by the victim.
This is done using two methods.
Sending malicious emails that contain scripts, code, or applications that get downloaded on your system and run in the background, slowing down the device, increasing the electricity bills, and overheating, while the hackers use that computing power to get profits out of it.
Hackers write malicious code to be run on websites by embedding it into Ads, or website plugins. These codes may be downloaded automatically on the user’s devices, run on pc and adjacent servers and utilize the computing power only to award the hackers.
Hackers also come up with innovative methods to infect the devices, because of the perks that allow them to earn rewards just by some lines of code.
This can be prevented by not clicking on unwanted links or advertisements and being careful while browsing the Internet.
This article tries to explain the concept of cryptocurrency mining in the simplest of words and analogies, and crypto-Jacking.
Although mining of Bitcoin has become costlier because of its energy consumption and hardware requirements, it is necessary to keep the cryptocurrency valid.
There are other cryptocurrencies that are coming up with better ways to increase the efficiency of mining. Some of the recent cryptocurrencies, instead of developing consensus algorithms that demand raw CPU/GPU performance and power, use the consensus algorithms to run API’s(Application program interface) or apps to mine cryptocurrency which is much efficient.
The future of cryptocurrency mining will depend on the algorithm designs and working of integrated systems, and the protocols to be completed by different cryptocurrencies.
Mining is a process that requires computational power. Steps to follow to start mining:
– Buy powerful hardware like GPUs and set-up high voltage power supply lines.
– Set up a cooling system.
– Setup a wallet to receive rewards
– Download the mining software for the appropriate currency
Join a Mining Pool
Cryptocurrency mining is the process of validating authenticity of transactions and getting rewarded in return.
Mining a Bitcoin takes 10 minutes, regardless of the number of miners.
Mining and possession of bitcoin is illegal in some countries. Nepal, Algeria, Morocco, Egypt are some of the countries where Bitcoin is completely banned.