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Crypto Mining and How Cryptocurrency Mining Works
Cryptocurrency is a digital payment backed by a network of computers that use cryptography to authenticate transactions. Depending on how investors expect to make money and how they work, some cryptocurrencies can be considered securities. If the traders of these coins keep the price high and go online to spread gossip, it could be considered a scam. It can be difficult to determine if a bubble exists. The only way to avoid its peak is through mass adoption.
Crypto mining is a popular topic on online forums. You have probably watched the video and read articles on Bitcoin, Dash, Ethereum, and other types of cryptocurrencies. And these contents often raise the topic of cryptocurrency mining. But all of this may make you wonder, “What is Bitcoin mining?” or “what is crypto mining?”
Cryptocurrency mining is a term that refers to the process of collecting cryptocurrencies as a reward for work done. (This is called bitcoin mining when it comes specifically to bitcoin mining.) But why do people mine cryptocurrencies? Some are looking for another source of income. For others, it’s about gaining more financial freedom without government or bank intervention. But whatever the reason, cryptocurrencies are generating growing interest from both technophiles, investors, and cybercriminals.
You may be wondering what types of cryptocurrencies exist. You’ve probably heard of some of these, like Bitcoin (BTC), Dash (DASH), and Monero (XMR). However, the reality is that there are thousands of different cryptocurrencies. Coinmarketcap.com reports that there are 7,433 cryptocurrencies as of Oct 16, 2020, and the global cryptocurrency market is valued at more than $ 356 billion.
In a more technical sense, cryptocurrency mining is a transactional process that involves the use of computers and cryptographic processes to solve complex functions and write data to the blockchain. In fact, there are entire networks of devices that participate in cryptocurrency mining and store shared records on these blockchains.
It is important to understand that the cryptocurrency market itself is an alternative to the traditional banking system that we use around the world. Therefore, to better understand how cryptocurrency mining works, you must first understand the difference between centralized and decentralized systems.
In traditional banking, there is a central body that monitors, maintains and updates a centralized registry (ledger). This means that every transaction must go through the central banking system, where it is recorded and verified. Furthermore, it is a limited system: only a small number of organizations (banks) can connect directly to the centralized banking system.
In the case of cryptocurrencies, there is no central authority and no centralized ledger. This is because cryptocurrencies operate on a decentralized system with a distributed ledger (more on this in a moment) known as a blockchain. Unlike the traditional banking system, anyone can directly connect to the cryptocurrency “system” and participate in it. You can send and receive payments without contacting the central bank. That is why it is called decentralized digital currency.
And that’s where crypto miners come in.Performing cryptographic calculations for each transaction adds a lot of computational work.Cropto miners use their computers to do the crypto work necessary to add new transactions to the ledger. As a thank you, they themselves receive a small amount of cryptocurrency..
Determining whether crypto mining is legal or illegal primarily depends on two key considerations:
- Your geographic location, and
- Whether you mine crypto through legal means.
However, you start to enter the territory of illegal activity when you use illegal funds to mine cryptocurrencies. For example, some cybercriminals use Javascript in browsers or install malware on unsuspecting users ‘devices to “hijack” their devices’ processing power. This type of cyberattack is known as cryptojacking.
But it is important to note that governments around the world view cryptocurrency mining differently. The Library of Congress has released a report stating that, for example, in Germany, bitcoin mining is considered to provide the service underlying the Bitcoin cryptocurrency system. LOC also reports that many local governments in China are cracking down on bitcoin mining, forcing many organizations to stop mining bitcoins altogether.
Cryptocurrency mining is an interesting alternative to the traditional centralized systems currently operating around the world. However, this is very expensive in terms of computing resources and energy, and as a result is not feasible for many users.
Harper Harrison is a reporter for The Hear UP. Harper got an internship at the NPR and worked as a reporter and producer. harper has also worked as a reporter for the Medium. Harper covers health and science for The Hear UP.