The processes to execute cryptocurrency mining is linked to the particular operation of the blockchain in which they operate
Cryptocurrency is one of the most mentioned terms in the network during the last years but that little by little it became one of those concepts that everyone knows but few know how to explain in depth. But beyond the definition established by experts for these digital assets, cryptocurrencies are the financial instrument of greatest interest today and represent the possibility of revolutionizing the economic system as it is currently known.
But where do cryptocurrencies come from?
Bitcoin is the world’s first decentralized and pseudo-anonymous electronic currency created by Satoshi Nakamoto in 2009 (The true identity of Satoshi Nakamoto remains unknown to this day). Since then Bitcoin has revolutionized the financial world by showing itself as an economical alternative to the traditional monetary system.
The main change is that no entity, agency or group can alter the conditions of its functionality. There are no intermediaries for access to cryptocurrencies, but it is their users who negotiate with them without the need for financial entities. Bitcoin was created to operate as a means of electronic, secure and fast exchange for the universal acquisition of goods and services, and that thanks to its new features and market volume, it remains the number one in the world to this day.
Behind Bitcoin, there is a more advanced innovative technology with a much greater applicability potential. Blockchain technology is a digital system that guarantees the validity of information and proposes a new way to provide security for all types of transactions. It acts as an accounting record in which cryptographic processes execute sophisticated mathematical algorithms that provide security, speed, and low cost.
Blockchain is a decentralized database that functions as an unalterable digital transaction book that allows digital information to be distributed, without being copied and stored anywhere, maintaining very high levels of security. All the information that is stored in the blockchain is backed by a shared database and because it is not stored in a single location, the records are easily identifiable, allowing access to all people on the Internet, since which is installed on millions of computers that link simultaneously.
It is in this sophisticated technology that cryptocurrencies operate, allowing a novel digital exchange system that works with cryptography to be carried out, to secure and verify financial transactions and control the creation of new cryptocurrency units.
Generating more cryptocurrencies
In the same way, as governments issue more and more monetary units printed on paper or coins, cryptocurrencies require a process to be generated which is known as cryptocurrency mining. Cryptocurrencies are generated thanks to the execution of a set of validation and transaction processing processes within a blockchain.
When the transactions or processes of a blockchain are confirmed, new crypto assets are issued that are assigned as a reward to those who have participated and validated a new block of the chain. These rewards are made up of the issuance of new currencies and the payment of commissions, values that vary according to the monetary system of the blockchain network for which the work is carried out.
Performing mining work depends on the algorithms used by the Blockchain network to reach distributed consensus, among them, are: Proof-of-Work, PoW, Proof-of-Stake, PoS. , among others. Since the birth of this innovative digital financial exchange system, many cryptocurrencies have emerged and with them, he developed many Blockchain networks, as well as many other consensus protocols.
The degree of ease or difficulty in cryptocurrency mining depends on each of them. While it is true that Bitcoin is the first and most popular cryptocurrency, there are currently many alternatives, also known as Altcoins. Each of these currencies has its algorithms and mining costs.
Thus, for example in bitcoin mining, which is carried out with the PoW protocol, the equipment used must have specific characteristics with advanced processors and video cards, which are both very expensive, which must remain active during a lot of time to have the option of being the winner of the validation of the block and the reward, which also implies an exaggerated investment of time and electricity.
Along with the popularity of mining, the complexity of the Bitcoin network also grows. The situation is easily explained by the fact that the calculations necessary for the production of the cryptocurrency are increasingly complex, and the mining process takes more time and more energy resources.
Between 30 and 60% of the profits obtained in mining are spent on energy costs.The figures indicate that to keep an entire computer infrastructure running at full capacity, huge amounts of money are required to have greater chances of earning the rewards of mining activity.
Mining groups (also called pools) are a way in which miners work together to increase efficiency and convenience, while dividing rewards. Group mining began when the difficulty of mining in the Bitcoin network increased to the point where it could take years for the slower miners to generate a block.
The solution to this problem was to pool their resources so that they could generate blocks faster and therefore receive a portion of the Bitcoin reward constantly, instead of chance once every few years.
More cryptocurrencies, more blockchains, more protocols
There are currently around 1,300 cryptocurrencies, which are known as alternative currencies or altcoins, this is because cryptocurrencies represent a constantly evolving innovation that is being assumed by many sectors of the economy to give it a Better use of blockchain technology and take advantage of its use in various sectors.
Likewise, blockchain developers focus on the creation of new digital assets that operate with more friendly protocols with miners and, not least, with the environment, because of the impact that this activity generates due to excessive energy expenditure.
This is how alternative protocols have emerged such as Proof of Play, used by Motocoin, Proof of Space and Proof of Time, developed for Chia Coin, and one of the most innovative Proof of Achievement developed by Ariancoin, which are aimed at eliminating disadvantages that other protocols present, among which is the loss of decentralization, high equipment costs, and excessive energy consumption.
Among the new protocols we want to highlight one in particular, it is PoAch (Proof of Achievement) because it is a unique and innovative protocol that bases its process more on the activity performed by the miner through his device than on the characteristics of the same and its capabilities These characteristics allow mining to be carried out with simple activities such as participating in a video game to reach a goal and achieve the validation of the chain blocks.
Thanks to these new protocols, cryptocurrency mining can be done more intelligently and without the need for expensive equipment, have great knowledge or associate in mining farms or pools, to enjoy the benefits that this digital activity can bring to the transformation of the economy of many people.
We hope that the information gathered in this article will be helpful to clarify your doubts and provide you with the necessary knowledge to increase your interest in the digital ecosystem, so we invite you to leave your comments and subscribe to our newsletter, so that you stay informed.