Blockchain Basics: What is Cryptocurrency Mining?
In this series, we’ll be exploring the basic concepts behind this incredible technology — blockchain, cryptocurrency, and more!
It’s inevitable that, when talking about blockchain and cryptocurrency, the subject of ‘mining’ is going to come up. Just like traditional miners dig for precious resources, cryptocurrency miners ‘dig’ for new cryptocurrency, bringing it into circulation. The process is time-consuming and can be painstaking work for miners, but they reap the rewards. Let’s take a closer look at how mining works.
Why Mine in the First Place?
Mining is vital for introducing new cryptocurrency onto the market. If there were no miners, additional coins would not exist — so miners are, in a way, ‘minting’ currency.
Mining also allows individuals to earn cryptocurrency without having to put money down first — but don’t think that it’s money for nothing. Plenty of work goes into the mining process, resulting in a cryptocurrency coin reward when a block has been mined.
A Block? Like Blockchain?
That’s right! Coins are mined in units called ‘blocks’ and each coin has a cut-off point, after which it cannot be mined any longer. For example, BZEdge has a maximum supply of 3.03 billion coins. Once that limit is hit, BZE mining produces more blocks but no more coins; miners are rewarded with block transaction fees rather than coins.
Miners work as auditors for the coin they are mining; when transactions take place they are included in a block, and the block has to be verified. Miners are the ones who find a solution for the block to be valid. They ensure the transaction is accurate, the information is authentic, and the blockchain is updated.
So how does Mining Work?
Each unmined block has a ‘hash value’ which comprises of a 64-digit hexadecimal number. This is the block’s unique identifier — and that is what the miner is attempting to discover. The goal of the miner is to be the first to discover a 64-digit hexadecimal number which is less than or equal to the target ‘hash.’
Miners use computers with dedicated hardware and software to zero in on the hash value. The first to crack it is considered to be the one who mined the block and who is eligible to be rewarded with the cryptocurrency the block holds — at the time of writing, each BZEdge block mined produces 156.25 BZE as a reward.
Miners are competing with their peers to be the first to find an appropriate hash value. As cryptocurrency becomes more popular, competition becomes fiercer — a high ‘hash rate’ and a lot of computing power are needed to successfully crack the code, or individuals have the option of joining a ‘mining pool’. These are groups of miners who collaborate and combine their resources to boost their chances of mining a new block, then sharing the reward. More mining resources = a better chance of finding the right hash value.
Do you have experience with cryptocurrency mining? Want to learn more about BZEdge? Join the conversation — you can find us on our website, on Twitter, Reddit, and Telegram.
