Unraveling Mining

02.11.2017 | 11:26 Home / News / Fintech /
#Mining #Cryptocurrency #bitcoin

Mining is wildly used in finances as the way of creating cryptocurrency. TASS Russian News Agency expanded on this term, and we offer the most noteworthy excerpts from the article.

What is mining?

Mining (extraction) is the method of getting cryptocurrency in your virtual wallet. In fact, it is also the only way of creating bitcoins. Cryptocurrency is created by users with relevant computer power, who launch the application. There is no central apparatus (for example, the state issues ruble in Russia) to issue this currency.

The application offers solving similar mathematical problems, and each solved problem allows creating a block. The application (which is called blockchain-system) consists of blocks, and miners get the network cryptocurrency as payment for creating those blocks.

Miners play a significant role in this system. If no one launches the application, no new block will be created, and the number of bitcoins will not increase. So the application will die in the end. But can you actually mine forever? Or do similar applications last for long? The answer is no. The creator of the network can set the “highest point” in the beginning. For example, no more than 21m bitcoins are envisioned in the network. According to the forecast, the last bitcoin will be created in 2140. That is to say the life expectancy of the most popular and expensive cryptocurrency is 131 years.


Why do miners need powerful graphics cards?

To outstrip competitors. In particular, thousands of miners launch the program, the app simultaneously (if it’s a popular blockchain network). The mathematical problem that the system offers to solve is the search for a new code (called hash). All users rush to find it. Whoever finds the new code first has the right to create a new block. The block creator gets a reward of 12,5 bitcoin.

The app that uses a graphics card solves the problem faster than CPU (central processing unit). The better the card is, the higher the speed gets. This raises the miner’s chances to create a block and earn cryptocurrency.

A new generation of mining

The new generation of mining already exists. Its scheme anticipates that facilities won’t matter and mining will be available only to those who already own cryptocurrency.

“Today powerful boards and graphics cards are the prevalent means of mining. It’s called proof-of-work, i.e. the winner is whoever has better facilities. There’s another type of mining, proof-of-stake. The more cryptocurrency you have, the better chances you get to create a block. You can mine on your phone or an ordinary notebook. That type is more environmentally friendly, as it’s less energy consuming. Proof-of-stake is developing now and will eventually replace proof-of-work,” noted representative of Waves blockchain platform in Russia Gleb Kostarev.

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