What is Crypto Mining?

Cryptocurrerncy mining rig red

What is Crypto Mining?

Since most cryptocurrencies operate on a decentralised blockchain where no individual or central party is in charge of verifying payments, there needs to be a consensus system where someone or something can validate the blockchains data entries.

This is the role of a crypto miner, otherwise known as a user who leases out their computers’ computational power to autonomously facilitate and verify transactions in real time. Cryptominers are also known as nodes.

miners mining bitcoin

When a node is mining, it is simply working out and completing a series of cryptographic mathematical problems, which entails talking to all the other nodes on the network in a synchronized fashion.

The miners coherently time stamp blocks of data entries, whilst simultaneously sharing the data with the rest of the network to prevent the double spending of coins, AKA- the doubling up of entries into the blockchain.

bitcoin coin in pile of coal

The incentive to be the first node to solve the problem is that for every ‘block’ they solve or facilitate, a small reward is granted by the network to the node. When the network rewards a miner, it simply sends some crypto to the wallet that is linked to miners machine.

This is how a cryptocurrency‘s blockchain network runs in a decentralised fashion, as the powerhouse of the network is just stand alone miners wanting to profit for their own interests.  A blockchain like Bitcoin is not powered by one individual, but by mass collaboration powered by collective self-interest.

complex price trading tech infographic

Since these entries are universally stored between all nodes on the system, in combination with the fact that the blockchain is 100% transparent, it is possible to view the state of any ongoing payment- as well as the networks entire transaction history and the balance of any wallet that you know the address to.

man mining computer screen with pick axe
Note* Since the price of Bitcoin is expected to increase over the years as more people buy in, the blockchain has an inbuilt event to cut the reward in half for mining a block, once every 210,000 blocks. This was a feature implemented to balance out the reward so there will always be an incentive for miners.  You can learn more about this here.

Can Anyone Mine Crypto?

Yes, anyone with a computer can mine cryptocurrency, however, there is a big difference in the profitability of using an 800$ laptop vs a dedicated mining rig.  These set-ups can cost thousands of dollars per unit, and they can be pooled together into huge mining supercomputers, like the image shown below.

Massive cryptocurrency Mining Pool

How much Energy does Crypto Mining Consume?

The amount of energy that is used up to mine bitcoin alone is just over 1% of the worlds energy output, about the same as the total energy consumption of Portugal.

You can, however, hook up your mining rig to a renewable energy generator, like a solar farm, to theoretically mine cryptocurrency indefinitely without having to pay a dime, apart for the overheads for the system components and maintenance themselves.

Clean green crypto mining renewable energy

Some alternative cryptocurrencies have different consensus systems, ones that use much less energy and can be much faster than Bitcoins in its current state. You can learn more about the different consensus systems here.