Mining
Mining

Mining

Mining refers to the act of creating new blocks and getting virtual currency such as Bitcoin as a reward.

The roles of the mining are the issuance of new virtual currency and approval of transactions.

The issuance of new currency refers to the task of creating blocks containing transactions.Transaction data are stored as a hash value. Transaction approval verifies that the transaction data is stored in a way that prevents modification.

The Structure of Mining

Mining uses a one-way irreversible function called a hash function.

A special feature of one-way irreversible functions is that it is impossible to make out the input value by looking at the output value.

Miners constantly replace the hash value in a block called the nonce until they find one that successfully creates the block. The process involves searching for various values until one is found that satisfies the hash value in the block header.

This act of going through nonces until finding the one that works is similar to miners digging until they find treasure. This is where mining gets its name.

Methods of Mining

There are three methods of mining, solo mining, cloud mining, and mining pools.

Solo mining is done by oneself. Solo mining can be very profitable when successful due to not having to pay any fees to intermediaries or dividing revenue.

Cloud mining is the process of investing in a group that performs mining. All one needs to do to participate is to simply provide funding. This way, the actual mining process can be performed in countries where electricity is particularly cheap.

Mining pools are groups of miners. Multiple miners who work in groups to mine their resources together is called mining pool. Mining as a group increases the stability of the operation as the rewards are distributed among the miners.