WHAT IS MINING?
Mining is a process of validating new crypto transactions and generating new transactions(coins) in the crypto world by solving complex mathematical problems. People who are responsible to initiate these processes are known as miners.
HOW MINING PROCESS IS DONE?
With the growth in the crypto world, it has become a business for many to earn hefty amount from this digital currency. Mining has become good business opportunity for many people. Whenever a new transaction happens, miners try to validate it by solving complex mathematical algorithms and generate a seed (any random value) which is then passed from a pseudo random number generator which gives a random number which is then applied to a hash function (SHA-256) and produces a hash value which if, is correct gets verified by other nodes(computers)which generates new coins(transactions)in the market and miner gets its reward.
THIS IS AN OVERVIEW OF THE MINING PROCESS; NOW LET’S UNDERSTAND IT DEEPLY-
SEED– It is any random number or a value like for example- choose any number from 1-10, say 7. This 7 is seed.
PSEUDO RANDOM NUMBER GENERATOR– This seed is passed through a pseudo random number generator which then produces a random number. For example- 7 is passed through this generator and it produces a random number-2563984547, now if 27 is seed, it produces a random number containing 27 digits. Also, you can use this big number as a seed and get another random number till it produces desired hash value. Now you will notice that the original seed will be back after every 10 numbers, 100 numbers, 1000 numbers, etc.
1 digit seed= original seed after every 10th time
2-digit seed= every 100th time
3-digit seed= every 1000th time and so on……
HASH FUNCTION– A detailed article will be posted on hashing later, but for now when that random number is applied to a hash function it produces a hash value which can be any bits long depending on the hash function/hash rate. This hash value makes mining a difficult problem. In order to make this process difficult, every time condition changes for a new hash value. For example, a new bitcoin block is generated after every 10 mins. So, after every 10 mins condition changes- hash should start with 30 zeroes, 37 zeroes, 40 zeroes, 72 zeroes, etc. which is very difficult to predict.
BITCOIN REWARD– Once the hash value founded by a miner is correct and gets verified by other miners too, then the winner miner gets some rewards. Currently, the reward per block is 6.25BTC. It is changed after every 4 years due to competition.
MINING PROCESS– It is a very difficult process which I have explained earlier too but there is more to explore. There are mining farms where mining happens daily with big equipment’s, technology, etc. Like before, CPUs were used to help in mining cryptocurrency. After CPUs, GPUs (GRAPHIC PROCESSING UNITS) were used. As 1 GPU= 30CPUs. Then, FPGA (field programmable gate array) came- hardware connected with computers to solve strong maths problems, which is 3 to 100 times faster. Also, currently ASIC (application specific integrated circuit) is used for mining bitcoins only.
MINING POWER-In order to mine new coins miners, require some mining power. It has 2 concepts-
PROOF OF WORK– It came in 1992 to combat spam emails, was named POW in 1997 and then introduced in 2009 by Satoshi Nakamoto when he introduced bitcoin. This mechanism requires huge computational power to solve the mining process. It uses lot of electricity, so to increase the mining power mining pools were formed- miners pool to solve complex mathematical problems and rewards get distributed according to their contribution. But due to excessive energy consumption, it was found ineffective and its alternative came-
PROOF OF STAKE– It was introduced in 2011. In this number of coins, a miner has more mining power he has. Example- if a miner A has 100 BTC to deposit and a miner B has 150 BTC to deposit then miner B will have more mining power or will be given preference over other miners in the mining process.
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