Although Bitcoin was presented many years ago, Crypto successfully attracts investors these days. But what is the source of these mysterious coins? Is there kind of a “Bitcoin goldmine” or do they appear straight out of nowhere? What does mining crypto mean? Today we will find out what is cryptocurrency mining process.
What Is Cryptocurrency?
Cryptocurrencies are digital currencies, that allow people to transfer money directly through an online system. They work quite similarly to real-world currencies, except they are not represented in a physical world and are encrypted. Government or banks have no control over these currencies so there’s no legislated value to them; the value depends solely on how much people are willing to pay for them. You can mine crypto coins or buy them from brokers or other users.
These currencies are based on blockchain technology. It’s a peer-to-peer network, designed to record and monitor all crypto transactions. Blockchains typically function via proof-of-work (PoW) or proof-of-stake (PoS) consensus algorithms.
PoW’s functioning relies on miners, while PoS runs on staking. Rewards are distributed to help run the network by holding assets in wallets.
The interest in cryptocurrencies increased as Bitcoin’s cost grew. Since then, people started to see investment potential in crypto. Despite the popularity, there’s valid criticism about is the technology able to replace even traditional currencies at least partially.
What Is Crypto Mining and How Does It Work?
So what does mining crypto even mean? To add a block to a blockchain, miners need to solve an extremely complicated math puzzle. To do it, they need to own an expensive computer and waste an enormous amount of electricity. The computer hardware required is known as application-specific integrated circuits, or ASICs, and can cost up to $10,000. ASICs consume huge amounts of electricity, which has drawn criticism from environmental groups and limits the profitability of miners.
The process of guessing an answer (hash) is known as proof of work. Miners can make as many guesses as they want, but the more miners participate, the harder it gets. The first miner to find a solution completes the mining process and is rewarded with coins.
What Is Cryptocurrency Used For In The Modern World?
1. Cheap money transfers
Low cost and fast speed are the main advantages of cryptocurrency payments.]
2. Earn interest
Trading crypto takes time and skills, but there are alternative ways of earning money, like Yield Earning, for example. Lend DeFi and gain a percentage of it.
3. An alternative store of wealth
Even though it’s not obvious, your bank account could easily deny you access to your funds. With crypto, it’s possible to avoid these sad consequences as no authorities have access to your crypto.
4. Invest in innovative early-stage startups
Newly-created coins may be promising startups to invest in. There are many other interesting crypto startups.
5. Make private transactions
Make anonymous transactions in crypto with a help of special privacy-centric currencies such as Monero (XMR), Zcash (ZEC), and PIVX (PIVX). There’s no need anymore to explain to a bank why you need to send such a large sum of money, what are the sources of the funds, and who is the recipient.
6. Send non-cash remittances
Some projects enable users to send non-cash remittances from anywhere in the world.
7. Earn by posting content
The world’s first incentivized blogging platform, Steemit, enables users to earn crypto by posting.
8. Rent out your spare hard drive space to the cloud
Some projects pay in crypto for allowing other users to rent the spare space on your hard drive. This type of storage solution is known to be faster, cheaper, and more secure than most traditional cloud storage platforms.
9. Travel the world
Nowadays it’s even possible to buy tickets to a plane with crypto! Several airlines allow it. Also book flights, car rentals, and hotels the same way.
10. Buy a Lamborghini
Luxury crypto marketplaces allow their wealthy users to buy fine wines, art, real estate, and other attributes of wealth, including even cars.
What does mining cryptocurrency mean? That is the question we answered in this article. Now you are almost ready to obtain coins yourself, all that you need is to decide what crypto to mine. Don’t forget to look out for great cryptocurrency payment processors too, they will be necessary for the future. Good luck!