What is mining?

1 November 2022
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What is mining?

It is known that blockchain technologies work without the usual server to store and process information. So where does the data reside? In the blocks that make up the blockchain. The next question arises - where do these blocks come from? Each block is created through a process of complex computer calculations - mining.

Miners' computers around the world are working uninterruptedly to generate new blocks, that is, out of millions of combinations, to select one single block to which the previous one can be attached. The blocks are generated by calculating a special key, the so-called hash, which serves to protect transaction data. This is a difficult and very energy-intensive process, and miners are rewarded for their work if they succeed, in the form of cryptocurrency or gas. The more miners there are, the more stable the network is.

It is not that difficult to mine little-known and inexpensive coins, even the simplest computer can do it. But the more popular and expensive a coin is, the harder it is to mine. The process becomes much more profitable, and already hundreds of thousands of miners want to get lucky. The competition between them increases, the required capacity of the equipment grows. As a result, entire mining farms appear, which include several powerful devices at once. Some of them look like huge factory shops with professional equipment. The appearance of such superfarms makes "home" mining impossible. Bitcoin is a prime example. In 2009, it was mined by a few hundred enthusiasts on home PCs, and today there are already more than one million people mining bitcoin in the world.

Important points:

  • Blockchain does not need a central server to process and store information. It resides in blocks that are created and maintained by special people, the miners.
  • The more miners in the network, the more stable it is.
  • Miners do not work for free, in case of success they are remunerated in cryptocurrency.
  • Mining a popular and expensive cryptocurrency is more expensive and energy-consuming than a little-known one.
  • Everything that has been said applies only to Proof-of-Work blockchains. PoW is a consensus algorithm that verifies the authenticity of every transaction in a blockchain.
  • There are already blockchains based on Proof-of-Stake algorithms that do not need mining. For example, the Binance Smart Chain network, which uses PoS to accelerate block formation and reduce costs. The AKRA token complies with the BEP-20 standard and is used in this network.

PoS allows you to mine or confirm transactions in blocks depending on the number of coins in the miner's possession: the more cryptocurrencies, the more opportunities.


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