Login
Blog What is cryptocurrency mining ?

What is cryptocurrency mining ?

As the foundation of Bitcoin network security, cryptocurrency mining is an activity that today has gained notoriety but is not always well understood.

For all people interested in the world of blockchain and cryptocurrency, whether they are experienced or beginners, mining is often the source of many questions.

Definition


Mining is an operation whose purpose is to validate a transaction on a blockchain network by means of a mathematical calculation. Its role is to secure the blockchain.

mining

History – the parallel with gold miners


As a nod to gold miners, the term cryptocurrency mining is directly associated with them. Why? Because like gold miners, leaving armed with their pickaxe in search of precious metals, cryptocurrency miners, equipped with their computers, set off in search of the digital grail: bitcoin. And for the miners, when they started their work, they didn't know whether the day would be prolific or not.
Quickly the world of mining cryptocurrency (like the world of gold) evolved. More and more people began to take an interest in this activity and it naturally became more professional, so much so that today, 10 years after the birth of Bitcoin, mining with one's personal computer is no longer really interesting from an economic point of view.

How it works


Let's talk Mathematics


When a miner validates a transaction on the blockchain, he is actually solving a mathematical operation. To solve this operation, the miner will test an infinite number of possibilities until he finds the right result. In this way, you will have understood that the more powerful the machine is, the faster it will be to process these operations and thus have a better chance of validating the block. Over time, this system has led to a lot of competition on the blockchain network and an increase in what is called "the difficulty of mining". To adapt to this increase in power on its network and to maintain an average block validation time (10min for Bitcoin), the Bitcoin protocol adjusts the mining difficulty on a regular basis.

The role of the miner


The miner is the key to the Bitcoin network, without him, no transaction validation and impossible to operate the blockchain. If his role is still the same today as it was at its origins: to make the network work, his way of doing the job has evolved over the years.

The miner now works with mining pools. He puts his computing power at the disposal of the pool, which plays the role of conductor in solving mathematical problems.

The reward system


You know the saying "all work deserves to be rewarded", which is what Satoshi, the mysterious creator of Bitcoin, wanted to include in his protocol: rewarding miners for their contribution.

Miners are rewarded each time they validates a block by a reward delivered in cryptocurrency (currently, on Bitcoin, the reward is 6.25 BTC per block, knowing that a block lasts on average 10 minutes). A specificity is interesting to underline on the rewards per block. Each time new miners join the network, competition increases. In this way, the hash difficulty increases, preventing the average block time from decreasing. Conversely, if the miners decide to leave the network, the hash difficulty will decrease and unlock the block reward more easily.

Often overlooked, the miner also receives a second reward: the network transaction fee. Users of cryptocurrencies, when they make a transaction on the blockchain pay a fee (the blockchain fee, mandatory). Fees used to remunerate the miner. Thus, over time, if fewer and fewer CTSs are distributed per block, fee rewards should increase.

The limits of mining


Cryptocurrency mining is obviously not an infallible solution and has several limitations. The first and probably the best known is the 51 attack. To put it very simply, this would mean that a single player has more than 51% of the network's power. In this way, the hacker would be able to perform all the transactions he wants, including doubling expenses and erasing the history. Rest assured, since the blockchain is transparent, such an attack would be immediately noticed and therefore in reality no one has any interest in trying to become so powerful. What is more, no one today has enough power to take control of the Bitcoin network.

There are also other limitations, particularly in terms of energy consumption, a subject that Bitcoin is often reproached for and unfortunately too often misunderstood or misinterpreted, but we will devote a more complete article to this later.

The mining equipment


As we have mentioned in the past, mining evolves over time, new currencies have appeared also using the mining system, specific machines have been adapted and then new algorithms to counter these machines deemed too powerful and so on. All these phenomena have meant that today, there are several ways to undermine cryptocurrencies and if you want our opinion, everything suggests that this world has not finished evolving.

GPU mining


This type of mining has several names, some talk about RIG (a Rig being the complete infrastructure of the machine), others of mining by GPUs (Graphics processing Unit), commonly called graphics cards. At Just Mining, miners of this type are grouped together in the BOB product range.

Technically, all graphics cards can mine. However, some will provide significantly better performance than others. As such, beware of "special mining" graphics cards, which are often more expensive and do not necessarily provide better performance than other conventional GPUs.

There are two main families of GPUS: AMD & Nvidia. Depending on the algorithm you want to mine, one or the other will be more efficient. For example, to mine on Ethereum (ETH) (Ethash algorithm, it will be necessary to privilege AMD).

GPU


Asics mining


Asics (Application-Specific Integrated Circuit) are machines that have been developed specifically for the mining of cryptocurrencies. Contrary to GPUs that have a use in everyday life, Asics are only used to mine cryptography. Much less flexible than the GPU, the Asics have nevertheless quickly distinguished themselves thanks to their performance, which is now much higher than that offered by GPUs.

There is a wide range of Asics that can mine on different algorithms. At Just Mining, you will find for example the Antminers S19 and S19 Pro which are currently the most powerful for mining bitcoin (BTC). Opposite, you will also find the A10 range for mining Ethereum (ETH) and the new Z15 for mining Zcash (ZEC). Note an entry-level range of 200€ for Bitcoin mining, the S9-SE, ideal for smaller budgets wishing to try mining.
asics



Mining farms


Larger-scale installations consisting of several tens, hundreds or even thousands of machines are called mining farms. These installations are more expensive projects that require more in-depth analysis. Thanks to our experience, we accompany many professionals and individuals in the realization of their mining farm project, in France and abroad.

Cloud mining


Cloud mining is a kind of by-product of mining, a dematerialized form. Indeed, mining with one's own machine requires some provisions (having cheap energy, an adapted environment,...). Cloud Mining makes it possible to overcome all these constraints. In fact, instead of buying your own mining machine, you will rent computing power to a company with machines.



Openness to new consensus


Over time, new protocols have emerged in order to provide the equivalent of a particular blockchain at lower cost, based for example on proof-of-stake (PoS). PoS allows individuals to wager or "fund" an amount of currency as insurance and then gain the confidence to validate transactions.

A protocol that has recently gained popularity thanks to Ethereum, which has announced the switch of its network from PoW (mining) to PoS.

Today, there are several dozen different protocols.

Conclusion


Cryptocurrency mining is a very particular world of blockchain. Simple in appearance, it is in fact much larger and more complex than it seems. Already rich in history, mining is constantly evolving and the more time passes, the more interest around this world grows, offering suggestions for improvement.

Beyond the contribution to the network, mining can prove to be a very profitable activity. If you have a mining project, our teams are at your disposal to discuss it with you.
Published by Just Mining on 12/06/2020
See also :

Turn the rewards from your masternodes, staking or mining into Gold thanks to an exceptional partnership between Just Mining and VeraOne.

Read the article
mining
masternode
staking
investment
cryptocurrency
wallet

A mining pool, is a service that allows miners to associate under the same entity, in order to mine cryptocurrencies.

Read the article
mining
investment
cryptocurrency

What is Cloud Mining ? Just Mining decrypt for you this investment model enabling to earn bitcoin without any hardware.

Read the article
mining
investment
cryptocurrency