As the success and popularity of crypto-currency continue to grow, so does its mining industry.
Like gold mining, the coins already exist in the protocols design they just haven’t been ‘dug up’ yet.
If you’ve been combing the internet in search of a simple explanation of crypto-mining then you’ve come to the right article. We won’t delve into ‘nodes’ or ‘hashing’, what we will do is combine the important aspects of crypto-mining into 5 main points.
Miners check crypto-currency transactions such as Bitcoin payments. Coins are mined and used as a reward for whoever can solve the maths problem and validate the transaction first. Mining set-ups range from home desktops to full-scale warehouses of servers.
Incentive for Mining
As mentioned, miners work to be the first to solve a maths problem and verify a transaction; in return, miners receive an incentive such as a fraction of a Bitcoin. This is an efficient method to distribute currency and encourage miners to participate.
Depending on how fast the maths problems are being solved, a Bitcoin network, for example, will automatically change the difficulty to ensure the block time (average time to solve the maths problem) stays about 10 minutes.
Miners check transactions, this combats the need for an intermediary or a ‘middleman’. To read more about Bitcoin transactions and decentralisation.
Crypto mining is basically an arms race and as more miners join, the math problems have become too difficult to solve alone. Therefore, Mining pools were developed to combat this problem, pools can find a solution faster and every miner involved shares the reward.