4 . Introduction to Cryptocurrency Mining | Steemit Crypto Academy | Lesson 4
Today we are starting a new topic. My first 3 lessons provided the fundamental knowledge which is required for a newbie who is entering the crypto currency industry. I like to invite you to go through them if you need the basic knowledge to start trading.
Today I'm going to discuss about cryptocurrency mining with you. Crypto mining is a wide topic. There are different methods and technologies used and need to get a overall idea about everything to be a successful miner. So my dear friends , let's see what is crypto currency mining.
What is Cryptocurrency Mining ?
The conventional method of issuing a fiat currency is governed by a central government of a country . For crypto currencies , the story is different as the majority of cryptocurrencies decentralized. So there is no one to verify the transactions within the network. This part is done by crypto currency miners. Let me explain this simply like this , Crypto Currency Mining is the process where a computer / machine performs a task and earn cryptocurrencies. That task here is the process of verifying crypto transactions (solving mathematical equations ) and inserting them to the blockchain. So as you can see Crypto Currency Mining is the process which keeps these crypto currencies active by enabling their transactions. Let's understand this process with a simple example.
If you look at the above diagram , Simon wants to do a payment to James using bitcoin. So Simon login to his bitcoin wallet with private key and requests a transaction to James bitcoin wallet for the payment amount. After submitting the transaction request , that request is bundled in to a block , in blockchain network with other blocks. This new block is broadcasted to all the mining nodes in bitcoin blockchain network . Then the process called mining starts. These nodes validates this transaction through processing mathematical algorithms. The miner who validate this first gets a amount of Bitcoin ( or the currency mining ) as a reward. Now after the validation , the transaction is confirmed and completed with a new permanent block added in to the blockchain.
[Source : https://www.youtube.com]
What is Proof of Work ?
This is commonly called PoW. A blockchain network of a particular cryptocurrency is a series of blocks. These blocks in a blockchain have a set of data or a chain of data which we call "nonces". These data chains are attached each block of the blockchain network. They are like a group of memories , we call it mempool. When mining the particular cryptocurrency , the miner ( computer/machine) need to find the correct nonce by processing complex mathematical computations. They need to continue it until the exact data string is processed. This process is called Pow , which is a set of complex steps. When the miner found the complete hash value , it announce it to the blockchain network and other nodes will validate it. Then a new block is created. This procedure is called the PoW. PoW algorithms shows a great resistance to different attacks on networks but the power consumption is high, which is a disadvantage.
What is Proof of Stake ?
PoS(Proof of Stake) can be considered as an alternative to PoW (Proof of Work) to create blocks in a particular blockchain. In PoS, block producer is called a validator instead of a miner. A validator must keep a deposit / hold and stake to participate the process of creating blocks in a particular blockchain.. In PoW, as I explained before the miners compete each other to create a new block. First miner to complete and produce a block will be rewarded. This is the miner with maximum computational ability. But in PoS, the validators are selected based different mechanism. Here the algorithm which select the validator consider the amount they stake. When the validator is selected through the algorithm , it get the authority to create the block. So other validators do not need to waste their processing power and energy as they are not selected at first. This will save lot of energy compared to PoW.
Proof of Work and Proof of Stake differences compared clearly in the following video. Please go through it to get a clear idea.
[Source : https://www.youtube.com]
What is a Mining Pool ?
Mining pool is simply a group of individual miners who work as a team to increase their probability of completing a block. The chance of finding / solving a block as a group is higher compared to individual. So what happens is , through this mining pool concept miners combine their computational ability together. So as a team they have a higher processing ability and it will give the output quickly. When considering the rewards, the reward earn through mining pool is divided among the members of the pool. So the income is comparatively high compared to individual mining.
There are number of mining pools. Most of them are designed to mine a selected crypto currency. Some of them allow to select between a set of cryptocurrencies. When selecting a mining pool we have to consider the hashrate , pool size , currency , terms and fees , payout options and amounts etc. After selecting a particular mining pool you need to configure the hardware and software accordingly. After that you can start mining. I will mention some leading mining pools. You can check them out. Poolin , F2Pool , AntPool , Houbi.Pool ,ViaBTC etc.
You can check the live data of different mining pools from here
For this topic there are lot of areas to cover. We need to learn about mining hardware's ( and different methods of mining (CPU mining, GPU mining -Nvidia 2060 |AMD 5700 XT , ASIC mining -Antminer Z15 |Toddminer C1, Cloud mining -Hashflare |Genesis Mining ) . And we need to discuss about crypto mining software's (Claymore , MultiMiner , CGMiner etc) . Let's discuss them in out future lessons.
Homework Task 4
You need to do your own research and create an article discussing following topics,
(1) How crypto currency mining works ?
(2) What is Mining Difficulty ?
(3) What are the challenges for crypto currency miners ?
• Your homework post should be posted in crypto-academy community.
• Your article should be at least 300 words.
• You have to create a simple guide in a way a newbie can understand and follow the steps.
• No plagiarism please . You can use images taken from copyright-free sources mentioning the source.
• The final submission date will be 07/03/2021
• Add tag @besticofinder in your post, it will help me to find your submission. Use #cryptoacademy and #besticofinder-week4 , so that Steemit Team can find you.