If you are interested in Blockchain and cryptocurrencies, you have certainly heard of the famous mining or cryptocurrency mining. This subject fascinates and is often accompanied by many questions. Also, we are going to produce a series of several articles in order to explain the basics of cryptocurrency mining. This first article is an introduction to the subject, we will see the definitions and operation of mining. In the following articles, we will deal with more specific topics (how to become a miner? Is it profitable? …).
The origins of mining
Let’s start with a short paragraph of history. The term “cryptocurrency mining” appeared in 2009, when the first Bitcoin blockchain was created, it has a direct relationship with gold miners. The latter, in search of wealth, left, pickaxe in hand, not knowing if they would return with pockets full of precious metals. In the same way, the bitcoin miner, equipped with his computer, set off to perform mathematical calculations, and when he found the right result, our miner was rewarded in bitcoin.
Today, mining has evolved, so that mining with a personal computer, even if technically possible, no longer has any economic interest. There are now specialized machines for this task: Asics where the RIGs (you can get this type of machine from the company Just Mining, the French leader on the subject). Other cryptocurrencies have taken up this mining concept such as Ethereum (ETH), Litecoin (LTC), Monero (XRM), etc.
The concept of cryptocurrency mining is not very difficult to understand. Mining is an operation consisting in validating a transaction on a blockchain network through a mathematical calculation. Mining technically dubbed “ Proof of work » (proof of work) thus makes it possible to secure the blockchain.
The role of the minor
The miner is the person who carries out the mining activity. It provides a mining pool its computing power. The pool acts as a conductor in solving mathematical problems. We will devote an article to the mining pool in the coming days. At the end of the operation, for his contribution, the miner is rewarded, he receives payments in cryptocurrency.
When you carry out a transaction in the traditional banking system, your bank takes the money from your account, it sends it to another bank which deposits it in the beneficiary’s account. The bank acts as a trusted third party. In the blockchain and mining economy, it is the minors who replace the trusted third party, there is no central body, it is in this sense that the blockchain is said to be decentralized.
Who are the minors
Businesses, individuals, you, me… anyone can technically be a cryptocurrency miner. Of course, the current market context means that it is not necessarily interesting for everyone to be. It should be understood that the system has been designed in such a way that anyone on the planet can become a miner and contribute in their own way to securing and developing the blockchain.
How does cryptocurrency mining work?
The proof of work
There are different ways to secure a blockchain. The best known, used from the outset by the Bitcoin blockchain, is proof of work (PoW – proof of work). This mechanism consists of solving a mathematical problem requiring computing power provided by computer hardware.
A history of mathematics
Mining is above all a matter of mathematics. Transaction validation is done by solving a complex mathematical problem. To find the solution to the problem, the miner will try a multitude of possibilities until finding the right result. This is why, the more computing power the miner has, the more likely he is to find the correct result before the other miners. This system naturally leads to competition and an increase in computing power over time. Thus, to adapt to the increase in this power, the protocol provides for the difficulty to adjust to maintain a constant average time per block (10 min for Bitcoin and 15 seconds for Ethereum for example).
An illustration to better understand
To illustrate how bitcoin mining works, we will take the example of Andreas M. Antonopoulos, famous bitcoin ambassador on sudoku. The latter compared mining to a huge Sudoku contest in which each participant would start a new grid as soon as one of them had found the solution to the previous one. The difficulty of the grid would be adjusted so that the average resolution time is 10 minutes (validation time of a block on the Bitcoin blockchain). Based on this principle, the difficulty of the grid can therefore be adjusted, so that the calculation can be very difficult to solve, but for all that, it will be very easy to verify.
On the Bitcoin blockchain, a block is checked on average every 10 minutes. After each block, new bitcoins are issued and distributed to miners who have found the solution. Today, 12.5 bitcoins are issued per block. This figure decreases over time, it is halved every 210,000 blocks (representing approximately 4 years), this phenomenon is called the halving. the next halving will take place in May 2020. But, the new bitcoins issued are not the only source of remuneration for miners. These also affect the transaction fees confirmed on the network.
What are the cryptocurrencies that can be mined?
While cryptocurrency mining is the most widely used security method, it is not the only one. There are dozens of security mechanisms (we will come back to this in other articles). Today, it is possible to miner many cryptocurrencies. To name only the best known: Ethereum (ETH), Zcash (ZEC), Litecoin (LTC), Monero (XRM), grin (GRIN),…
We will go into more detail on how to mine these cryptocurrencies in a dedicated article. In a second article, we will see how to mine cryptocurrencies.
Cryptocurrency mining is an essential topic at the heart of blockchain and cryptocurrencies. Although very simple in appearance, it is a very complex and particular market that often suffers from misinformation. We will try to correct them in other more detailed articles (eg mining and ecology, profitability of mining, etc.).