What is crypto mining?
Blockchain, cryptocurrency, Bitcoin – these might all be terms that roll off the tongue while chatting with your mates over a beer or three. Or they might be terms that cause your eyes to glaze over and brain to short-circuit as you hear them bandied about for the millionth time with no real concept of what they mean.
One thing’s for sure, the world of crypto is here to stay. So even if you don’t fancy yourself as a hardcore crypto trader any time soon, it’s useful to get a handle on the basics so you can at least nod along meaningfully next time they come up over coffee at a dinner party. Let’s start from the top:
What is cryptocurrency?
Cryptocurrency, or crypto, is a form of digital payment that can be exchanged for online goods and services, though much interest in it is in trading for profit. Companies may issue their own currency, usually called tokens, that can be traded for their own goods or services, a bit like casino chips, that you need to buy with real currency. Cryptocurrency uses blockchain, a decentralised technology spread across many computers simultaneously that manages and records transactions. There are 1000s of cryptocurrencies traded publically, with more being added every day. Bitcoin, launched over a decade ago, is by far the most popular, although another common one is Ethereum.
Why are cryptocurrencies so popular?
The appeal of cryptocurrency is due to a number of factors. In particular, the technology it’s based on, blockchain, is decentralised, meaning the process of recording transactions is more secure than traditional payment systems. It also circumvents central banks who manage traditional money supplies and tend to reduce the value of money over time by inflation. It’s also seen as the currency of the future, so many want to invest now on the assumption it will become more valuable in future. Others have no interest in the acceptance of it as a type of mainstream currency but as a way of making money through buying and selling it, such as by using a bitcoin era platform.
What is crypto mining?
Crypto mining, or cryptocurrency mining, is the process by which new units of digital currency are created or “minted” and entered into circulation. Miners, as they are so-called, compete with each other using expensive machines with extensive computing power to solve complex mathematical equations generated by Bitcoin’s algorithm. Once they do, Bitcoin’s code awards a certain amount of Bitcoin. The challenge is, miners have to be the first to solve the puzzle or they don’t get the reward, so all that complex computing work might be wasted. While Bitcoin used to be mined on desktop computers, it’s now generated by mining pools spread across many locations. As the process consumes vast amounts of electricity, many pools are now moving to places where renewable energy is available to reduce the impact on the environment.
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