Cryptocurrency Mining: A Beginner's Introduction

At many blockchain networks like in the case of Bitcoin, Ethereum, cryptocurrency mining is a critical process in their operation. For our beginner's guide to cryptocurrency mining, we'll cover what cryptocurrency mining is, how it works, and what you'll need to get started.

What is Cryptocurrency Mining?

Cryptocurrency mining is the process of using computational power to validate and record transactions on a blockchain network.

Miners - participants in the network - use specialized hardware and software to solve cryptographic hash functions or complex mathematical puzzles that validate and add new transactions to the blockchain.

How Does Cryptocurrency Mining Work?

Validation of Transaction: When a user sends a cryptocurrency transaction, it will be broadcasted to the network and put into a pool of unconfirmed transactions called the mempool.
The Mining Process: Miners take transactions form the mempool and group them as blocks. They would then race each other to the solution of a hash function-mathematically designed to keep a set of data secure by completing a large number of calculations through their processing power.
Proof of Work (PoW): Bitcoin and many other cryptocurrencies use proof of work. Before they earn the right to mine a block, miners must find a hash value that satisfies the critical target difficulty, and doing so demands a great deal of computing power.
Blocks Creation: Once a miner has uncovered a solution to the computational math puzzle by making many complex, high-speed, heavy-duty studies, it is distributed to the network, along with a new block of transactions he has confirmed. The solution to the proof of work problem is broadcast to the network, and the members of the network check the new block for other reasons why it might be invalid if accepted.
Distribution of Rewards: The reward is distributed to the miner as a cryptocurrency, which is freshly created, and is called the block reward, along with the transaction fees which are in the block. This is done to incentivize mining and to validate transactions against the available collective computing power.

What You Need to Start Mining

Hardware: Cryptocurrency mining generally involves specialized hardware, in the form of mining rigs that are specifically designed to handle the calculations required. For Bitcoin, common mining hardware include ASIC (Application-Specific Integrated Circuit) miners while other cryptocurrencies like Ethereum can be mined with GPU (Graphics Processing Unit) miners.
Software: Along with the hardware, the miners also require the mining to get their affairs in order and beget direct interaction together with the block-chain network. Mining software allows miners to setup different mining rigs, connect to the mining pool, and track miners' hashrate.
Electricity: Mining Cryptocurrencies consume a big bunch of power requirements as this mining hardware is working 24/7. When calculating the return on mining power, the cost of electricity is a key factor to consider.
Internet Connection: Miners must have a stable internet connection so that they can communicate with the blockchain network, get new transactions and spread the block to all of the other nodes.

Mining Pools

With cryptocurrencies becoming more challenging and competitive, countless cryptominers find themselves combining their computing power in mining pools to boost their chances of successfully mining a block. Mining pools pay rewards to their participants based on the their overall hash rate share across the pool.

Conclusion

Cryptocurrency mining is also used as the mechanism for ensuring the integrity of decentralized coins and for validating transactions that have to do with the launching of these coins on programmable digital currencies.

Great opportunity, however not without generous consideration of costs, risks, and rewards - mining. While the cryptocurrency landscape has expanded, mining continues to be important for the upkeep of the network and its mechanisms.