What is Cryptocurrency Mining?
Although Bitcoin is the most widely used mining method, there are other cryptocurrencies that are also mineable.
Cryptocurrency mining is the process of processing transactions between users. It is also responsible for the creation of new coins and the existing circulating supply.
How does it work?
A miner is a network node that collects transactions and assembles them into blocks.
The first step in mining a block is to hash all transactions taken from the memory pool. Before starting the process, the mining node adds a transaction called the block reward.
Each transaction is hashed, and afterwards, the hashes are organized into a Merkle Tree, which is a hash tree. The top hash is a single key that represents all the previous transactions that were used to create it.
The hash of the previous block and its random number nonce are then placed in the block’s header. A block’s output is generated based on those elements.
The output of a block hash must be less than a certain threshold value that is determined by the protocol.
The target value is computed by the algorithm used to generate new blocks. It’s constantly adjusted to ensure that the rate at which blocks are created remains constant.
The difficulty of hashing will increase as more miners join the network. This increases the network’s block time, which is the reason why it stays constant.
When two miners broadcast a valid block, the network gets two competing blocks. This causes the miners to start mining the next block. The abandoned block gets discarded and is replaced by the new one.
In Conclusion
Cryptocurrency mining is a process that involves the creation of new coins. Its goal is to introduce new coins into the existing supply.
Bitcoin is the most widely used cryptocurrency for mining. However, there are other coins that are not mineable.
