When you ask people what comes to mind when they think of crypto mining, you will definitely hear people giving answers that revolve around creating a new coin. While this is still true, there is still much to be uncovered. In a nutshell, crypto mining involves creating a new coin, validating the transactions within the blockchain network and adding them to a distributed ledger. Jason Guck, an old-time crypto investor with many years of experience in the crypto space shares his insights on crypto mining and what future it holds. Take a look below.
Crypto mining defined
Just like physical money, when one person decides to spend cryptocurrency, this transaction is recorded by means of debiting one account and crediting the other. However, cryptocurrency is a form of digital money, which means that is can easily be manipulated, being on a digital platform. Mr. Guck gives Bitcoin as an example, which has distributed ledgers that can only be updated by verified miners. Miners also ensure that there is no double spending in the distributed ledgers. Additionally, to incentivize them to validate the transactions, miners are awarded with newly coins that are generated. Validating transactions is crucial in securing the network since the distributed ledgers do not have a centralized authority, and there is dire need to confirm that there isn’t any double spending. Moreover, to certify that only verified miners update the ledgers, a proof of work protocol has been put in place to ward off any external attacks.
How crypto is mined
Jason Guck compares mining precious minerals to mining cryptocurrency. He believes them to be quite similar. Miners solve complex mathematical equations called cryptographic hashes using very advanced machines, which trigger the release of new coins. A hash is a digital signature containing a large chunk of data that ensures secure transfer of data in the network. Every crypto coin transaction generates hash values and miners compete to solve this equation in order to receive the reward.
Concerns on crypto mining.
Mining cryptocurrency has brought some concerns over the years due to some the issues listed below.
Mining is quite an expensive undertaking. Mining involves the use of super computers called GPUs and ASIC devices whose costs shoot through the roof. This equipment is worth thousands of dollars, which create more barriers in crypto mining. In addition to the costs, these powerful machines consume a substantial amount of electricity due to their high processing power. Cooling machines are required to combat the heat generated by these machines, adding to the already-high electricity consumption. Depending on the country, government policies can either serve as a hindrance or an advantage to crypto mining. For example, countries like Germany have made cryptocurrency exempt from tax while some countries like China have banned cryptocurrency altogether. This affects mining in certain locations based upon the region’s regulations concerning cryptocurrency.
Conclusion
What next? The truth is, no one knows. Contrary to the unpredictable nature of cryptocurrency, Mr. Guck affirms that most people are actually expecting mining to increase because more and more people and countries are adopting cryptocurrency in masses. Additionally, some crypto networks like Ethereum are making plans to move from a proof of work protocol to a proof of stake system in efforts to address the environmental crisis brought about by mining. So, is crypto mining set to be around for the near future? Very much indeed.