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Enter the terms you wish to search for. Ever wondered how bitcoins are actually made? Over the past several years, cryptocurrencies like Bitcoin have been quietly growing in popularity, with an ever-larger number of people buying and selling them. Now that Bitcoin has hit the mainstream and become a worldwide phenomenon, more people than ever are looking to get into the cryptocurrency game. However, the production of cryptocurrencies isn’t anything like that of regular money. So what is cryptocurrency mining, and how does it work? Cryptocurrency mining and the blockchain Before getting to grips with the process of cryptocurrency mining, we need to explain what blockchain is and how that works.
Blockchain is a technology that supports almost every cryptocurrency. What is the value of Bitcoin? These transactions are assembled into what are called “blocks”. These are the verified to ensure they are legitimate by cryptocurrency miners. This checks if the same coin hasn’t been expended again before the transaction has cleared, and that the input and output expenses tally.
Then the next sequential transaction block is connected to it. Mining new blocks As there is no central authority or central bank, there has to be a way of gathering every transaction carried out with a cryptocurrency in order to create a new block. Network nodes that carry out this task called dubbed ‘miners’. Every time a slew of transactions is amassed into a block, this is appended to the blockchain. Whoever appends the block gets rewarded with some of that cryptocurrency. To prevent the devaluation of the currency by miners building lots of blocks, the task is made harder to conduct.
This is achieved by making miners solve complicated mathematical problems called proof of work’. Calculating hashes In order to successfully create a block, it must be accompanied by a cryptographic hash that fulfills certain requirements. The only feasible way to arrive at a hash matching the correct criteria is to simply calculate as many as possible and wait until you get a matching hash. When the right hash is found, a new block is formed and the miner that found it is awarded with units of cryptocurrency. Think of it like one of those competitions where you have to guess the weight of the cake – only you get unlimited guesses, and the first one to submit a correct answer wins. Whoever can make guesses at the fastest rate has a higher chance of winning.
Cryptocurrency mining limits In practice, this means that miners are competing against each other to calculate as many hashes as possible, in the hopes of getting to be the first one to hit the correct one, form a block and get their cryptocurrency payout. However, the difficulty of calculating the hashes also scales – every new block of bitcoins becomes harder to mine. In theory, this ensures that the rate at which new blocks are created remains steady. Many cryptocurrencies also have a finite limit on the amount of units that can ever be generated. That’s seen requirements leap – from a reasonably-powerful processor, to a high-end GPU, to several GPUs working in conjunction, to -now – specialised chips specifically configured for cryptomining. 1,000 on the appropriate hardware to mine most modern cryptocurrencies with any success.