Cryptocurrency : What is Cryptocurrency Mining and How Cryptocurrency Works

Cryptocurrency was borne out of the need for a digital currency. Basically, cryptocurrency is a digital currency that uses strong encryption techniques to regulate how the currency is being generated and also verify the transfer of funds. All these are done independently of any central system or bank.

This digital currency is designed to be unforgeable and therefore difficult to counterfeit mainly because of its strong security feature (encryption).

The main selling point of the cryptocurrency technology is that the system is decentralized and not controlled by any particular authority. This means the system is immune to any government interference or manipulations.

The first cryptocurrency was announced in 2009 and was created by Satoshi Nakamoto, he called it Bitcoin. Bitcoin is currently the most valuable cryptocurrency.

Cryptocurrency

How cryptocurrency works

Basically, cryptocurrencies consist of various peers networked together. Each peer in the network has a record of all transaction history and the balance of each account.

Cryptocurrency runs on a blockchain which can be seen as the network, every transaction on the network (blockchain) and the history of the cryptocurrency ownership is recorded on the blockchain.

This blockchain (network) is run by miners (you would understand this well when you read the next subheading). But in summary, miners update each transaction made on the network and ensure the authenticity and integrity of the information.

Also, the value of the cryptocurrency is determined by the market just like the stock market. There is no fixed price, buyers and sellers agree on a fair price for the commodity.

All participants in the market remain anonymous although the transactions are made public to all peers in the blockchain.

What is cryptocurrency mining?

To most people, the whole concept of cryptocurrency is gibberish and just confusing. It is somehow hard to explain but to break it down, cryptocurrency mining is basically the process of adding transaction and releasing new currencies for future transactions.

The mining process involves two functions which are; adding transactions to the blockchain (this entails securing and verifying the transaction) and the second is releasing the new currency. The process of cryptocurrency mining requires a dedicated computer and a special program that will enable miners to work out the process.

To summarize, mining involves solving complicated mathematical problems (this is known as a block). The mining consumes lots of computer resources in the process, miners aim to crack the target value in order to be rewarded. The reward for mining a block in cryptocurrency is 12.5 bitcoins.

The mining business has become lucrative since the popularity of cryptocurrency grew, however, the cost of acquiring the needed equipment to be able to compete with other miners in this field is somewhat exorbitant.

According to a Bloomberg report, it would cost miners an average of $3,500 to acquire a complete mining kit. The kit consists of; graphic cards, a strong processor, memory, a fan, cabling kits and a good power supply. Also, the top mining hardware tools available on the market are; Avalon6, Antminer S7, and S9.

Types of cryptocurrency

Although Bitcoin remains the most popular and most valuable cryptocurrency currently available, they are other cryptocurrencies that are fast growing. The list below contains all the top cryptocurrencies available;

Bitcoin

Ethereum

Litecoin

Ripple

Then, Ethereum classic

Dash

Augur etc

Cryptocurrency and the future

The future is definitely bright for the cryptocurrency market, the market is growing very fast and new cryptocurrencies are emerging.

Ethereum has emerged to become the first application where blockchain technology is being practically used to create viable applications.

Finally, it’s almost certain cryptocurrencies has come to stay, the rate of its popularity and acceptance is just wow. In the near future, the world will turn to cryptocurrencies like bitcoin as a way to hedge against the shortfalls of the economy.

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