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What is cryptocurrency mining ?
The act of mining a cryptocurrency consists in providing a service to the blockchain network of this cryptocurrency in exchange for a reward. In the simplest case, the rendered service consists in checking the validity of a set of transactions. Each time a set of transactions is validated, it constitutes a block. If this block meets certain criteria, it is then added to the blockchain and the “miner” who made up this block is rewarded for his/her work.
How does it work ?
All cryptocurrencies are based on a peer-to-peer network. This network is made up of servers (mining machines) which operate dedicated software. These machines are the nodes of the network and the computer program that allows communication between the nodes is called “client”. Each mining machine can run its own implementation of the “mining program” but to be able to be part of the network this cryptomining computer program must be interoperable with other implementations operating on the network. In practice, the majority of nodes operate the same computer program which is a benchmark “mining program” developed by the creators of the cryptocurrency. In the case of Bitcoin, it is “Bitcoin Core”.
A mining rig works in an autonomous manner and can decide if it wants to provide multiple services :
- Information propagation : When a cryptocurrency user decides to carry out a transaction, he/she encodes and then sends (using his/her software or wallet application) his/her transaction on the network. To do this, he/she contacts a list of nodes (mining machines) and sends them the encoding of his/her transaction. Each node (mining machine) can then, if it wishes, send this encoding to other nodes, thus allowing information to be propagated to all the users in the network. Likewise, when a node receives a new block to add to the chain, it can send it to other nodes to propagate the information.
- Decentralization of information : Each node (mining machine) records the entire blockchain. This means that at all times the complete transaction history of the cryptocurrency is recorded in different machines, located in different jurisdictions and operated by different cryptominers.
- Information sharing : If desired, a node (mining machine) can make its version of the blockchain available to the public by downloading. Thus a newcomer to the network can update himself/herself with the history of transactions.
- Verification : When a node (mining machine) receives a transaction, it can verify that the issuer of the transaction has the funds it claims to spend. Likewise, when a node receives a new block, it can verify that the latter is valid.
- Finding and adding blocks : The most intensive service in terms of electricity consumption is the constitution of new blocks. To do this, a node (mining machine) assembles a group of transactions, verifies them, then tries to constitute a block containing these transactions as well as a hash (encoding key) of the previous block, guaranteeing the tamper-proof character of the chain. If so, the node (mining machine) issues this new block to the entire network so that all other nodes recognize it as valid and add it to their version of the blockchain.
What are the costs ?
- Electricity : A mining rig consumes energy.
- Bandwidth : Providing some of the above services requires a stable and fast internet connection.
- Investment : A node (mining machine) is above all a computer server and the purchase of a computer server has a cost. In addition, the registration of the blockchain (in continuous growth) requires a dedicated hard drive.
To generate the greatest possible number of nodes (mining rigs), cryptocurrencies are designed in such a way that the above services are financially rewarded. It is mining. Nodes (machines) that operate for the sole purpose of collecting financial reward are called “miners”. That said, some nodes are funded by donations or pure dedication to a cryptocurrency, and generally those nodes don’t mine.
Why choose a virtual mining rig over a hardware mining rig ?
- You don’t need to have space in your home to put the machine in.
- You don’t need to spend electricity.
- You don’t need to have a stable and fast internet connection.
- You don’t need to update.
- You don’t need to dust the machine.
- You don’t need to deal with hardware failures.
- You don’t need to be computer literate.
This is a virtual rig base. You can only mine a few cryptocurrencies. To mine more cryptocurrencies and increase your mining speed, you need to add GPUs to this base :