This is straight from our online course that will be launched on May 17th, 2022 – we keep it short, to the point and in understandable terms. Very visually engaging and keeping text to a minimum – you CAN enjoy learning about crypto!

Topic 6 What is mining?

This is where things can get a little tricky.  We promised to keep the tech speak to a minimum, but I have to say that this subject is absolutely one of the most frequently asked questions about crypto.  To take it a step further, it also seems to be one of the most misunderstood parts about crypto.  Let’s clear the air.

In the crypto industry, mining is the process by which new cryptos are created.  Once created, they may be sent into circulation, as in the case of an initial coin offering (which is when a coin is first minted) or they may be held on to for sale in the future, as in the case of crypto miners.  Miners may hold on to the crypto they earn because they think the value will increase (earning crypto is called a reward in crypto terms – this is because miners are “rewarded” with a certain amount of the crypto they are mining, for being the first to validate the next block of transactions)  Miners can be as small as an individual person or as large as a publicly traded company.  Today it is not as easy for an individual to mine crypto because of big company competition, but it wasn’t always that way.  Before crypto got its popularity of today, there were many mining rigs stationed in garages and basements around the world.  For those smaller operations to survive, some cryptos now have to maintain at or above a certain price level or else they would have to shut down.  When that happens, the larger mining operations take over and gain that profit share.

Miner’s purchase specialized equipment called GPU’s and ASICs that perform complex calculations with blinding speed.  Through the process of these calculations, these computers verify, validate, and record all transactions to ensure the blockchain they are mining is accurate and secure.  Can you imagine a human being trying to solve a 64-digit hexadecimal hash that can be made up of both numbers and letters.  Absolutely impossible to do it once – these machines are doing it 24/7 365 days a year, they never sleep unless the electricity goes out.  Just to drop a number in your head, they are sometimes processing billions of calculations per second…

The term mining is a metaphor.  When you are mining for crypto there is no pick and axe involved, there isn’t even any physical labor other than some assembly of the machinery.  You are essentially a landlord over these super processing computers.  Make sure you have electricity, make sure you have fans for the tremendous amount of heat they put off, make sure they are working and then sit back and let them do their job.

Mining is critical in the functioning of all things crypto.  Beyond releasing new coins into circulation, it is central to the security of crypto.  The validations that miners perform allow crypto to function as the peer-to-peer decentralized network it is supposed to be.  Remember from topic three that crypto being decentralized is one of the core definitions of crypto.  It’s what allows you the freedom to do anything you want with your assets and not have to have an authority like a bank or government approve it.

If you want to get into mining for a profit, you’ll need to spend some time doing more research.  This course is only defining what miners are and what they do.  There are many resources on the internet that can give you an idea of the startup costs involved, how much electricity you’ll be using based on the equipment you buy and also what the “earn or reward rate” you might expect among different cryptos.

Sincerely,

Cryptical Thinking