Cryptocurrency Mining
Cryptocurrency mining might sound like something you do with a shovel and a hard hat but it’s actually more like accounting. Miners are nodes that perform a special task that makes transactions possible. I’ll use an example to show you how it works using the Bitcoin network.
George owes Michael 10 BTC. George announces that he is sending Michael 10 BTC to the Bitcoin network.
Miners take the information and encrypt it. This is called hashing. To this information, they add other transaction information and hash that too. More and more information is added and hashed until there is enough to form a block.
The miners now race against each other to guess the encrypted code or block hash that will be given to the new block before it’s added to the blockchain. The lucky miner that guesses the right code gets to add the new block to the blockchain.
Now, all the other nodes on the network verify the transaction information in the new block. They check the whole blockchain to make sure that the new information matches. If it does, then the new block is valid, and the winning miner can add the new block to the blockchain. This is called confirmation.
Michael receives 10 BTC from George.
Mining cryptocurrency uses a lot of computer power, so miners are rewarded for the work they do. On the Bitcoin network, miners who confirm new blocks of information are rewarded with 12.5 BTC of new Bitcoin. This is why it’s called mining. Instead of mining for gold or coal crypto, miners are digging for new Bitcoin!
So, What is Cryptocurrency Mining For?
What is Cryptocurrency
It’s the way cryptocurrency networks like Bitcoin verify and confirm new transactions. It stops double spending without the need to trust centralized accounting as banks do. Cryptocurrency blockchains aren’t secured by trust or people. They are secured by math done by computers!
For more information, check out my Blockchain Explained guide.
Now you know how blockchains and crypto mining work. Next, I’ll tell you how you can join a cryptocurrency network…
Using Cryptocurrencies
Using cryptocurrencies isn’t like using fiat currency. You can’t hold cryptocurrency in your hand and you can’t open a cryptocurrency account. Cryptocurrency only exists on the blockchain. Users access their cryptocurrency using codes called public and private keys.
It’s a bit like sending emails. If you want someone to send you an email, you tell them your email address. Well, if you want someone to send you cryptocurrency, you tell them your public key.
Now, if you want to read your emails or send an email, you need to enter your email password. This is how private keys work. Private keys are like passwords for cryptocurrency. Public keys can be seen by anyone, but private keys should only be seen by you. If there is one paramount detail you should learn from this What is Cryptocurrency guide, it’s that keeping your private keys safe is extremely important!
What is CryptocurrencyPrivate and public keys are kept in wallets. Crypto wallets can be online, offline, software, hardware or even paper. Some can be downloaded for free or are hosted by websites. Others are more expensive. For example, hardware wallets can cost around a hundred US Dollars. You should use several different kinds of wallets when you use cryptocurrency.
Whoever has the private and public keys owns the cryptocurrency, so don’t lose your wallets! Cryptocurrency is pseudonymous, remember? There is no way to prove your own cryptocurrency unless you have the keys to it.
I’ve told you about how the first cryptocurrency was created and how it works. I’ve also told you about how cryptocurrency is stored and used. Now, let’s look at some other cryptocurrencies that have been created since Bitcoin…
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Bitcoin is really just a list. Person A sent X bitcoin to person B, who sent Y bitcoin to person C, etc. By tallying these transactions up, everyone knows where individual users stand. It's important to note that these transactions do not necessarily need to be done from human to human.Some downsides are that hardware wallets are recognizable physical objects which could be discovered and which give away that you probably own bitcoins. This is worth considering when for example crossing borders. They also cost more than software wallets. Still, physical access to a hardware wallet does not mean that the keys are easily compromised, even though it does make it easier to compromise the hardware wallet. The groups that have created the most popular hardware wallets have gone to great lengths to harden the devices to physical threats and, though not impossible, only technically skilled people with specialized equipment have been able to get access to the private keys without the owner's consent. However, physically-powerful people such as armed border guards upon seeing the hardware wallet could force you to type in the PIN number to unlock the device and steal the bitcoins.xpub bitcoin tera bitcoin компиляция bitcoin видеокарты ethereum bitcoin loto ethereum twitter plus500 bitcoin mikrotik bitcoin currency bitcoin bitcoin рубль bitcoin monkey bitcoin сигналы polkadot stingray вход bitcoin bitcoin home
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