Cryptocurrency mining is a course through which it is intended to extract new types of coins and verify the legality of transactions made in the chain of blocks. Cryptomining is used for Bitcoin and other cryptocurrencies. They are large networks of computers scattered around the world, run by miners, who check and secure the digital ledgers that document cryptocurrency transactions. There are multiple ways to achieve cryptocurrency.
Requirements to do Cryptomining
For a long time, any individual with a computer can be an expert cryptominer. With the passage of time, the chain of blocks is growing, the computing power has increased. Today, in the United States, large specialized companies or mining pools with large resources are the ones that carry out the process of mining cryptocurrencies.
Farms or mining pools are areas built in regions with access to cheaper electricity, originated by groups of miners who try to achieve greater profitability by pooling their CPU units. In order to know how to handle cryptomining, it is necessary to have two essential elements involved in the process:
• Cryptowallet or digital wallet: It is where the miner can store what he earns as a result of his work.
• Mining software: People have to invest in powerful technological equipment such as a graphics processing unit (GPU) or an application specific integrated circuit (ASIC). Some miners purchase personal graphics cards as an inexpensive way to improvise mining operations.
Crypto Mining Risks
There are several risks to take into account. For this reason, cryptocurrency mining is not legalized in countries like China, Russia, among others.
• Environmental impact. It emphasizes mining cryptocurrencies, it is an expensive method, and harmful to the environment because of the amount of electricity used for it. It is estimated that by 2024, mining will conjecture a CO2 emission of 130.5 million tons, according to a study carried out by the University of Cambridge.
• Volatility. Most cryptocurrencies are highly volatile. It is not possible to know when they will peak or break down and the market responds accordingly.
How Cryptocurrency Mining Works
To successfully include a block, miners scramble to come up with solutions to fairly complicated mathematical problems. Miners walk through trillions of hashes every second until they get one that satisfies a condition called difficulty. So the difficulty, like the hash, are very large figures stated in bits, so the condition simply needs the hash to be less than the problem.
The difficulty only increases as more miners join the network. The miner who manages to solve the puzzle will be the one who updates the Blockchain ledger with all verified transactions, being able to add a block to the chain and receive a predetermined stimulus.
Bitcoin Miner Earnings
The network recognizes the work carried out by Bitcoin miners in the form of prizes for conceiving new blocks. There are two types of compensation: new Bitcoin originated with each block and fees paid by users to make transactions on the network. At the end of 2020, the reward was 6.25 bitcoins, although the rewards halve every 4 years or so. As the difficulty of mining increases, the compensation will decrease. By achieving the above, inflation and the circulation rate of the cryptocurrency, in this case, Bitcoin, are minimized.