Cryptocurrency is basically a virtual currency that is secured by cryptography. Cryptocurrency is not a coin a paper bill issued by central government, neither its value is not based on any asset like gold, silver, nor the crypto transactions go through a bank or financial institution. It is a completely decentralized system that uses the blockchain technology. Its decentralized system ensures that there is no monopoly in transaction verification.
Before understanding what is crypto mining, you first need to understand how the transactions are done in crypto currency using the block chain technology. Suppose a person needs to purchase a TESLA car using Bitcoin (TESLA allowed it from March end to 12 May,2021). If it is bank transaction it would have gone through the centralized bank for verification and the transaction would take place. But, lack of centralized system makes it more complex to verify a crypto transaction. So, here the role of crypto mining comes to play. In this process, the crypto transaction is shared with everyone in the bitcoin network. These transactions added to a shared list of transactions known as a block and every 10 minutes a new block is added to the chain of already existing blocks and that becomes a block chain.
For the transaction to be verified, very complex functions or problems are needed to be solve. When the transaction is shared to the bitcoin network, some of the people try to solve the functions to verify the transaction and those who solve it first, their record becomes the official record. Thus, they help in maintaining a public ledger of verified transactions. This means the record (ledger) of all transactions is publicly available and stored on lots of different computers. Of course, if you are putting your time, effort, resources and energy, you won’t do it for free. Hence, for the successful verification of the transaction they are rewarded by a bitcoin or other crypto currency and the network gets a new block on the chain. This entire process of verifying the crypto transaction is known as mining.
This process is generally done by multiple super computers working at the same time, consuming large amount of energy. Also, the problem with this process is that the puzzle becomes harder when more computers are involved in the process and thus greater energy consumption. So, retail miners could barely earn enough from this process. This process will continue till all the 21 million bitcoins are mined which is most likely to happen till 2140.
Tell me in comments if you like this information.
Now enjoy the fun of learning listening to my blog. Check the link below.