When you hear the word mining you probably think of actual mining, underground, digging aimlessly hoping to find treasure. Well, that’s not too far off from crypto mining except instead of a dark mine, you are in a dark basement, and instead of a pickax, you use your computer. Well, not just your computer, it would require some software and hardware support, but you get the idea.
In order to fully understand how mining works, you have to have some background knowledge of blockchain. Decentralization was possible because of Byzantine Fault Tolerance algorithms that allow for communication between nodes even when one is at risk.
The Byzantine problem is presented as a series of generals who all need to make a coordinated attack but they all need to be able to communicate with one another accurately taking into account that one general might be a traitor. Decentralized systems on the blockchain use proof of work as a BFT algorithm by making miners solve the proof of work in order to be able to earn bitcoin as a reward for their work.
As a miner, your computer, and its supporting hardware are working toward processing thousands of cryptocurrency transactions into a block that will be added to the chain. It takes quite a bit of time, effort and energy in order for your machine to be able to mine a whole block, and this varies depending on the cryptocurrency that you are mining and the hardware that you have.
Ultimately, your job as miner is to be the new “middle man”. Instead of banks, central banks and federal reserves, its just a peer-to-peer system, where we trust one another to verify transactions. As explained, we don’t just trust each other blindly. The reason why this works as a decentralized system is thanks to proof of work. Once the proof of work is complete it can easily be verified and almost impossible to change.
Also, kind of like gold mining, crypto mining pays out in whatever cryptocurrency for miners to do said ‘mining’. In order to incentivize crypto currency users to actually mine, they need to be getting some kind of pay out for the work that they are doing.
Today, mining is a lot less profitable than it was when cryptocurrencies first began. As blocks get larger and take more computing power to hash, the electricity prices for mining those cryptocurrencies also goes up. If you have high electric costs for low crypto turn outs, you are not likely to be turning a profit.
In addition, there are many new crypto currencies constantly coming to the market, and it may sometimes be profitable to hash those new currencies, but sometimes they are also scams and so you have wasted time and electricity(money) on a crypto currency that is worthless and that you will never actually be able to sell for a profit.
It is still possible to make money off of mining in 2019, and in fact you can calculate the mining profitability of different contracts for different currencies in automated calculators. Make sure that you take all costs into account, and that you are able to afford the higher electric fees in whatever you place you are living or planning on setting up your mining rig. Be sure to follow us on social media for shout outs, giveaways and so much more.