The cryptocurrency miners are responsible to do the mining. To put it simply if you are familiar with what is crypto mining then you also know the goal of the miners. A process where transactions for different types of digital currency are verified and added to the blockchain record is called Cryptocurrency mining.
Mining is a computational and numerical operation that puts the blocks. When the transaction takes place in the block, verification is said to be finished. This process needs around ten minutes to complete. In case if the transaction is big and you truly need the transaction to be strong, at that point you should wait until six confirmations and you can be absolutely sure that the transaction is verified. This will cause the sender getting no chance to reverse the transaction.
How Cryptocurrency is Generated?
New cryptocurrency is generated each time when a network node finds the solution to a particular math problem. It will create a new block, which is called proof-of-work.
To get into deep about “Proof of work”, I moved on to Bitcoin.org It helped me more to understand Mining. I got that mining is not translated as “Producing”, but translated as “Processing”. Here I will explain that mining is about processing transactions in the Bitcoin network.
Each and every transaction must be included in a blockchain. The users or participants agree on the status of the system through this blockchain. Those transactions that are verified and confirmed must appear clearly in the block. Mining follows a lottery principle that prevents individuals from changing parts of the blockchain.
I perceive myself a bit smarter, but terms like blockchain, proof-of-work or lottery principle still leave me helpless.
The explanation to this problem helps further. As with any digital currency or any digital payment process, Bitcoin raises the question of how to clearly claim ownership?. Every bitcoin may only be available once for all. This requires a unique signature.
Unlike other payment systems (e.g., credit cards), bitcoin is a distributed system, which in this case means that transactions are not handled by a central office (e.g., a credit card company). As it is not controlled by the central office that’s why it is a little difficult to provide security. In other words, something in the decentralized system must make sure that transactions do not occur multiple times and must prevent anyone from injecting false transactions or spending it multiple times. It must be ensured that every user always knows the current status of all transactions and of course their history.
Proof of Work
Creating and checking a block is so complicated as cryptology and math. The critical point is the statement that there must not be any different blockchains.
It is about solving a difficult mathematical problem. In the case of the proof of work, it is difficult for users to create a new block for the blockchain. The task of the miners is to find the solution to a mathematical problem. The trick: the solution is known, the way is not.
In other words, it is mathematically quite easy to find a suitable result or output for a given formula (input). The reverse is a difficult mathematical undertaking. The most sensible way is to experiment with options until the result fits. Mining works on this principle.
All miners in the network keep trying until the first finds a solution. It is more than sensible to bring a lot of computing power with you. According to its share of computing power in the overall network, the respective miner has a chance of finding the right solution. For example, we saw blocks emerge about every 10 minutes. If a user has 10 percent of the total computing power, then it takes an average of 100 minutes to solve a block.
Of course, the miner can also be lucky and find a solution faster than others. But there is a danger in that, because one user might want to put the other one on the wrong block. So that the others do not notice this later on, he would have to succeed in adding more false blocks to the Blockchain. Mathematically, the probability for it decreases exponentially. Therefore, it only becomes dangerous if a single user owns at least 51 percent of the network computing power.
Hash Tags and Merkle Trees
The described trial and error method for solving the mathematical function is solved in the Bitcoin protocol by so-called hash functions (SHA-2). Each transaction is based on such a function, that it has a specific hash. The blocks bundle these individual transactions.
To achieve this, you organize the individual hash in a so-called Merkle tree. The individual transactions are bundled in pairs to form a new hash until it cannot go any further. This top level is called root hash (Tx_Root). This root hash, in turn, is a necessary component to continue the blockchain. Smallest changes in the hash history change the value of the root hash.
So that not all calculations from the past have to be recreated over and over again. You take this root hash and add it to the hash of the previous block. Timestamps and a kind of nonce counter complete a new block. The nonce counts how many attempts were needed to find a solution to the initial problem. This bundle serves as the basis for the proof of work and makes the blockchain connectable. All computers in the network only have to check the validity of the new block.
Bitcoin miners are responsible for controlling the transactions. Miners are users with a special task. In simple terms, it consists of providing computing power to validate the transactions.
In addition, the miners collect independently of each other all payments and try to bundle several hundred of them in blocks. But with a complex (developed by the NSA) crypto-mathematical procedures that is not made easy for them. The calculation therefore takes some time.
The user, who creates the new block fast, wins the race, as it makes the calculation attempts of other users obsolete. The winner, the miner with the correct result, receives a reward. The more computing power the minder has provided in during mining process, the higher chances of success. It’s like the lottery principle as we discussed before.
The right hardware for mining
As we know that new bitcoins emerge approximately every ten minutes and are a reward to users who keep the Bitcoin system alive by providing computing power. Their computing power validates Bitcoin transactions.
However, the new bitcoins are always only given to the user who first creates this validation by means of a specific calculation and thereby continues the blockchain. Everyone else is empty. That’s why producing new bitcoins is also a lottery.
Nowadays small and private Bitcoin miners have a hard time. Why is that?
Reminder: If you want to mine bitcoins, you have to solve a mathematical problem. More specifically, the minder must calculate or guess a SHA-256 hash. For example, the hello world greeting in SHA-256 hash would look like this:
Whenever a bitcoin miner guesses the input to a given hash in the trial-and-error process, it will always win the new bitcoins.
To be the first and win the bitcoins, the computer used for mining must calculate as many hashes as possible. The key figures are therefore hashes per second (H / s), or mega-, giga- and terahashes per second.
A decent hardware is the prerequisite to mine bitcoins. But whether an investment is worth it is another matter. Most of the articles on the subject advise against it, so my impression. The main reasons are the massively increasing hash rate and the number of users. In the beginning, Bitcoin was still something for insiders. The better it became known, the more people plunged into the gold rush.
But all had more or less the same requirements based on CPU or GPU mining. Only FPGA and ASIC led to massive leaps in the global hash rate.
New Idea: Mining Pools
As an alternative to self-mining, I keep hearing about so-called mining pools. In doing so, users get together to dig for money or simply buy the necessary computing power from companies.
If everything goes right, you get bitcoins in proportion to the computing power that you provide to the pool. That sounds plausible, maybe that’s the alternative to finally get involved.
A quick look at the mining pools reveals that once again endless expanses open up. That starts with a large number of providers. The Bitcoin wiki kills me with almost 40 different providers and a table, which gives me clues, in which the pools differ from each other, but these differences are not really explained. Only after extensive pastime with YouTube explanatory videos slowly light comes into the darkness.
Mining Pools – spoiled for choice
There are many mining pools and the more I read into the subject, the more I get the impression that none of these pools is always the best for every user.
An interesting note in a YouTube video sums it up nicely. Not every user achieves the same results on a single platform. Whether one or the other platform is good depends a lot on hardware, luck, and political attitude. It is best to try them out so you know what they are doing in a specific case.
The right software
A small building block is still missing, to finally understand the mysterious cryptocurrency mining. We have to take the digital hammer into our own hands. Logically, we need the right software for that.
While the hardware is, so to speak, responsible for the power work, ie the calculations, the software does the rest. It distributes the work and transfers the results of the calculation to the blockchain or mine mining pool. For this, you usually just have to enter the corresponding pool.
In addition to these core tasks, the software also evaluates your own statistics and monitors the process with corresponding information on hash rate, mining speed, fan and temperature regulation of the computer.
Which mining software is right?
As with the mining pools, the software also has a number of options. Fortunately, the choice here is not that big.
Basically, there is mining software with the frontend, so with the user interface, and framework-based, that is: with inputs from the command line. For the latter one must call the appropriate input mask, a so-called terminal. In addition to these two options, there are also browser-based applications.
Decisive is of course the hardware. Not all, but some of the different programs are designed for CPU / GPU-based mining on the one hand and FPGA or ASIC configurations on the other hand. But many miners are also in control of everything.