How does Crypto Currency Mining Work?
How does Crypto Currency Mining Work?
General Rundown Cryptocurrency mining has two main functions: to mint digital currency and to incentivize validators to confirm transactions on the blockchain and update the ledger.
The term “mining” comes from the early days of Bitcoin, when users of a Bitcoin forum drew an analogy between the act of producing and procuring BTC and mining precious metals like gold.
Cryptocurrency mining has become an incredibly lucrative industry with many different players, from publicly listed mining companies, to mining manufacturers, data hosting providers, and equipment manufacturers.
Individuals often choose to mine cryptocurrencies to make a passive income, or as a long-term investment in a cryptocurrency project they have faith in. Mining cryptocurrencies can be a good deal, as it usually costs less to mine digital currencies than to buy them at their market price.
But how does crypto currency mining really work? Let’s look at Bitcoin as an example.
How Bitcoin mining works Bitcoin and other digital currencies like Litecoin, Dogecoin, and formerly Ethereum are mined under a protocol known as Proof of Work (PoW).
PoW refers to the process by which miners compete with others on the network to “mine” the next block — or to write the next block of transactions. They do this by using computing power to solve a mathematical puzzle.
The first miner (or group of miners in a mining pool) that solves the equation gets to write the next block of transactions. In the case of Bitcoin, miners are then rewarded with BTC.
PoW is known as a consensus mechanism, which is the way validators on the blockchain agree on the correct version of data to be added to the chain.
Putting in the work is necessary to ensure that validators are honest and it also provides extrinsic value to the currency. PoW also secures the system by deterring malicious individuals from attempting to manipulate the data due to cost and energy limitations.
Because blockchains are distributed networks, a single bad actor or a group of actors would have to control 51% of the network’s hashing power to be able to rewrite the blocks and change the data, which is highly unlikely.
What do you need to mine crypto? To mine crypto, you generally need a high-powered computer, cheap and abundant electricity, a special mining software, and a digital wallet to receive funds.
However, each of these requirements will change depending on the cryptocurrency you want to mine. For instance, ASIC miners are widely considered the best for mining Bitcoin, while GPUs are recommended for mining Ethereum. Other currencies like Filecoin require miners to provide digital storage space with a hard drive.
Mining cryptocurrencies requires a lot of technical knowledge. As a layperson, it can be a risky game to play. This is where mining facilitators come in.
What is a mining facilitator? Mining facilitators are companies that provide a variety of mining services, such as machines, hosting services, maintenance, and financial advice.
Mining facilitators are a great way for novices to break into the industry and learn more about mining, as they guide you every step of the way and can answer all of your questions.
Of course, you have to do your research and make sure you choose a decent company. There are many scams out there! With Cloud Rush, a mining facilitator based in southern California, we don’t just sell you “hashing power” from our devices — we actually sell you the hardware itself so you own it.
Because we are a Filecoin mining operation, we sell hard drives, and for more expensive plans, the mining machine itself. Filecoin is a decentralized digital file storage network where miners provide digital storage to the network in order to receive Filecoin. As such, Filecoin represents an actual commodity — digital storage space.
This industry is set to explode within the next decade, with tens of billions of dollars already backing it.
Cloud Rush USA also offers remote hosting of its miners at a secure and reliable internet data center, thus ensuring you get the most out of your machine without having to get your hands dirty. It’s definitely a great offer for the not-so-technically-savvy. We at Cloud Rush USA can’t wait to have you on board! If you’d like to learn more about Cloud Rush, visit our website, contact us at , or reach us at 626–317–9736.