What Is Crypto Mining | For Beginners.

Hi folks. Do you know something I've learned recently is that it's very, very useful to know one of these shadowy, supercoder types who keep Mr Ajit Doval awake at night? Well, not literally. Well, I suppose you never know. Anyway, I have a friend. Called Rakesh and he is a whiz with computers and he has very kindly put together this little beauty for me. Now it doesn't look like much, does it? Well, this is actually my very first crypto mining rig. Crypto Mining In India!?!.Now, wait, I know what some of you may be thinking. Guy, come off it. Crypto mining is big business. You'd need a room filled with thousands of those if you wanted to become a crypto miner. Well, you're half right. But before I talk about this chap here, I want to talk briefly about the mining process, because it's one of the most technical. And tricky aspects of crypto to try and wrap your brain around so. Here goes, and. So let's start with Bitcoin now. 

How Is Bitcoin Mining Done?

Here is a very, very simplified explanation of how Bitcoin is mined, so groups of transactions are batched together into blocks which form the Bitcoin blockchain. Now these blocks are encoded using. Hash function and this assigns each block a very very long unique number and so this work is carried out by the miners on the Bitcoin network and it's also their job to process the blocks and add them to the chain. Now in order to link two blocks together. The newest block on the chain must contain its own unique hash number and the hash number of the preceding block. This is. This matching allows them to link together, so only by knowing this previous number can a minor add their new block to the chain. So how do the miners know this previous hash number? Well, the simple answer is and the very simple answer is that they have to guess it now, because this number is so damn long, you can imagine that guessing it is not easy. In fact, the odds of doing so are. Trillions to one, so therefore, in order to guess this number, the miners computer must submit a lot of guesses and doing that means expending a lot of computing power. Now all the miners on the network submit these guesses until one of them gets it right. And when they do. They are allowed to add their block to the chain and in return for their efforts. Sorry, in return for their efforts, they receive the block reward, which is of course fresh and tasty bitcoins. So the block reward is 6.25 bitcoins to be precise. At this point in time or. Around $123,701.25 at today's prices and this system is called proof of work and the work of course being done is that done by the miners computers which then translates itself into very large electricity bills. 

First Crypto Miner : Laszlo Hanyecz 

So when Bitcoin first appeared, it was actually possible to mine bitcoins using a home computer and its central processing unit or CPU. But Satoshi coded Bitcoin so that as the network grew and more miners joined it, the difficulty level of the mining would increase and the reasoning behind this. Was to ensure that new blocks and new coins were produced roughly every 10 minutes, no matter how much computing power was being thrown at the network. It sort of was. It was designed basically to kind of self regulate in this way. So at first, there weren't very many people using the Bitcoin network. It was really only a handful of enthusiasts who'd kind of discovered it through the cypherpunk mailing list and and other forums. But one of these, and one of these guys, was Satoshi. He was obviously mining it as well, but in 2010 there was a software. Engineer called Laszlo Hanyecz and he was trying to improve the network by finding its potential vulnerabilities so that they could be fixed. Basically, he was one of the good guys, in other words, so one such vulnerability that he considered would be what would happen if someone with a lot of computing power began mining bitcoins. And therefore winning more now, this was theoretically possible even with the inbuilt difficulty increases that Satoshi had written into Bitcoin's code. So Laszlo's idea was instead of using his computer's CPU to do the hard work, he would instead use a part of his computer that was actually better. Suited to doing the kind of work involved in mining his graphics processing unit or GPU. The plot thickens. So to cut a Long story short, it worked. Laszlo's GPU powered mining. It won him loads more bitcoins than before and it changed the nature of Bitcoin mining forever. And if you've heard Laszlo's name before, it sounds familiar. This is because he is the guy. Who then spent 10,000 BTC on pizzas because he had so many BTC lying around thanks to his high tech mining, and he is Bitcoin pizza guy. Yeah, it all comes together. So as you can imagine, this started off the arms race that has led us to the situation today where proof of work mining involves basically warehouses full of specially designed mining rigs running 24/7 to earn those block rewards while using more electricity than many countries. So this has. Actually been good for Bitcoin and other proof of work cryptos like ethereum for the time being, because the more computing power on their networks, the more secure they become. 

Crypto Mining Difficulty:-

But the downside is that it has sadly made mining these cryptos impossible for, well, ordinary folks like you and me. This with that regular old computers at home. Now nowadays, because proof of work mining is expensive, it consumes a lot of power and it requires a lot of specialized equipment. Many cryptos are mined differently, and this often requires putting up a lot of money in order to become a validator on a proof of stake network. You've probably heard that term before. I won't dig into it too much here. So the thing to remember is that even with proof of stake, the barriers to entry remain high, but in a different way. And crucially, mining becomes more centralized as a result. So in crypto, obviously centralization goes down like Wasps at a picnic. 

However, there are some exceptions , and this state of affairs, and that brings me neatly on to this little baby, now one cryptocurrency that still uses proof of work mining is Monero and that is the number one privacy focused coin out there. It's a fascinating.

I will definately publish an article on monero soon dont forget to check that out , Thank You.

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