Cryptocurrencies are taking the world by storm as more people, even investors, want to cash in on digital currencies. Volatility in the market remains a concern, but that hasn’t stopped enthusiastic people from mining BTC or other currencies.
With the right setup, you can be up and running your own mining operation to be rewarded crypto.
In this article, we’re going to dive into what cryptocurrency is, what it’s used for and how mining works from a more technical standpoint.
What is Cryptocurrency?
Cryptocurrency is a digital currency that uses encryption to secure transactions and verify funds. It is also known as virtual currency, and it’s a method of payment that’s completely independent of banks and governments.
Cryptocurrency isn’t a physical currency like the kind you might carry around in your wallet. It’s completely digital. The transactions are all made on the blockchain, which:
- Requires all transactions to be verified (more on that below)
- Is added to make all transactions final and permanent
- Is 100% public so that nodes can verify transactions
The first cryptocurrency was Bitcoin. A Bitcoin is a digital token that’s issued by the network to reward miners for their work on the blockchain, and it can be exchanged for other cryptoassets or fiat currencies.
Today, Bitcoin’s value has soared, making it the world’s most valuable form of cryptocurrency. It hit a market capitalization of $1 trillion, although falling values cut this figure down significantly.
The high value of some coins adds to cryptocurrency mining profitability, but as more competition begins mining, it’s more difficult for new miners to get a foothold in the market.
But with cryptocurrency mining software and the right equipment, it’s still possible to mine for crypto.
Demand for crypto is only increasing as more retailers begin to accept digital currencies.
What is Cryptocurrency Used for In the Modern World?
Cryptocurrency became popular after consumers wanted to find a way to break free from the centralized banking systems used by governments today. Crypto grew in popularity because of the decentralized nature of currency.
Since there’s no centralized authority, transactions can be made anonymously with the use of a wallet which doesn’t include identifiable information.
While there’s no connection to you, there is a ledger that is made to track all of the transactions made. The transactions are public and stored across an array of computers which verify the transaction.
In terms of security, cryptocurrency is a highly secure form of currency, although it’s threatening to banks and governments that have tried to put regulations in place to stifle crypto.
In the modern world, you’ll find crypto used for purchasing:
- Online goods
- Event tickets
- Some monthly services
Of course, due to the decentralized nature of cryptocurrencies, there are a lot of nefarious uses, too.
How Cryptomining Works?
Cryptocurrency mining is the process by which new cryptocurrency blocks are created with the use of computer hardware. The process involves solving complex mathematical equations, and the reward is a certain amount of cryptocurrency.
In the early days of cryptocurrency, mining was conducted with standard computers. As the market grew, the difficulty of mining grew with it. To solve this problem, miners began using graphics cards, and then field-programmable gate arrays.
Today, application-specific integrated circuits (ASICs) are used to mine cryptocurrency.
Miners play an integral role in the complex blockchain process, which includes multiple moving parts:
- Nodes, which are devices that are on the blockchain, such as your computer.
- Miners that work to verify unconfirmed blocks. The verification results in crypto being rewarded to the individual.
- Transactions where one party transfers crypto from one person to another. Transactions start out unverified before being verified by miner nodes.
- Hashes, which are used to verify mining transactions.
- Nonces, which are the numbers miners are searching for and are added to the block’s hash.
- Blocks, which are segments of the blockchain.
- Blockchain or the series of blocks that cannot be altered and are made in chronological order.
It’s hard to start mining cryptocurrency today than in the past because there’s a lot more competition involved. But you can still mine less popular coins that don’t include Bitcoin. Of course, you can choose to mine Bitcoin or any currency, but you’ll need a decent upfront investment to start making money mining cryptocurrency.
Meta Description: What is cryptocurrency mining? Learn what mining involves and why people from around the world have decided to start mining digital currencies.
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