Cryptocurrency mining is the process by which new digital coins are created and transactions are verified on the blockchain. It involves solving complex mathematical problems using powerful computers.
What is Cryptocurrency Mining?
Mining is the process of adding new transactions to the blockchain and securing the network. Miners use specialized hardware to solve cryptographic puzzles, and in return, they are rewarded with newly created cryptocurrency.
How Does Mining Work?
- Transaction Verification: Miners verify transactions and add them to a block.
- Solving Puzzles: Miners compete to solve a cryptographic puzzle.
- Block Addition: The first miner to solve the puzzle adds the block to the blockchain.
- Reward: The successful miner receives a reward in the form of newly created cryptocurrency.
Types of Mining
- Proof of Work (PoW): Miners solve complex puzzles to validate transactions (e.g., Bitcoin).
- Proof of Stake (PoS): Validators are chosen based on the number of coins they hold and are willing to “stake” as collateral (e.g., Ethereum 2.0).
Mining Hardware
- ASIC Miners: Application-Specific Integrated Circuits designed for mining specific cryptocurrencies.
- GPU Miners: Graphics Processing Units used for mining multiple types of cryptocurrencies