Cryptocurrency

The Ultimate Guide to Mining Cryptocurrency

What exactly is mining of cryptocurrency? It is the process of creating new bitcoins. Mining is also the way transactions are being validated. It’s a decentralized clearinghouse. It protects the system and helps with creating a consensus throughout the whole network without actually having a central authority. It is a truly revolutionary technology.

Bitcoin mechanics and economics
You can think of mining as a contest for solving an algorithm as fast as possible. Special hardware is used in order to do this task efficiently and quickly and the person who finishes first gets a reward known as coinbase transaction.

N0des, used in mining, are monitoring for new ones. When a new block appears, the node selects the winner which stops the old competition and gives start to the new one. The completed block is validated and added to the ledger, and the mining node combines the transactions in a candidate block and begins to solve the algorithm.

To put it simply, mining includes repeated hashing of the block header. In this way the parameter (nonce) is altered and the goal is to, in the end, match a particular target. This is done by randomly changing it, until there is a match. There is no way to guess the needed result, you have to go through the whole process every time.

The Target
The already mentioned “target” is very difficult to achieve on purpose. The system adjusts it in such a way as to take about 10 minutes for all the miners (and their combined power) to reach the correct answer. The first individual who succeeds is automatically validated as having the correct answer since there is no way of guessing it. This whole process required a huge amount of electricity.

Adjustability difficulties
Every 10 minutes a new block is created. The system automatically changes the parameter so that it could fill in this time period. The difficulty depends mostly on the whole computing power of the network. If the miners are being faster than 10 minutes, then the difficulty will increase and vice versa. The more people are joining and the competition becomes bigger, the more the difficulty has to increase.