Wondering what Blockchain mining is all about and how it is profitable? If yes, then read this article on Blockchain mining through which you can gain insights on what is Blockchain mining and how it works.
Blockchain has more than just mining. To know more about Blockchain Technology, check out the Live Blockchain Training.
Below are the topics that I will be covering in this article:
Why Mining?
Nobody does anything without a reason, and when it comes to Technology, you would do something either because it is fun and interesting, or because you get some profit out of it. The question “Why Mining?” can be divided into 2 questions:
- Why would somebody mine Blockchain?
- Why is Blockchain Mining Necessary?
Why would somebody mine Blockchain?
Money! Yes, you can make money by mining Blockchain. But how much? That depends on your mining capacity. Mining requires some resources such as Computational Hardware, Cooling System, Electricity, and Maintenance. The more powerful your mining setup is the more your mining capacity will be, and the more money you can make.
Just to give you an idea, I am listing how much it would cost to mine a Bitcoin in different countries
| India | $3,274 |
| Singapore | $5,936 |
| United States | $4,758 |
| United Kingdom | $8,402 |
To know more about the cost of mining in different countries, visit this link.
You know that you get paid for mining Blockchain. But why would you get paid for mining? That’s because mining is important for Blockchain to maintain integrity and mining contributes to it. Wondering how? Well, that leads us to the next question.
Why is Blockchain Mining Necessary?
Blockchain Technology has prioritized fraud prevention. Any transaction will be added to the Blockchain only after it is validated. This is to prevent fake/fraud transactions. And the validation happens through Mining. So when I say you get paid for mining Blockchain, it actually means that you are getting paid for confirming the transactions.
Now that you have understood why Blockchain Mining is necessary, let’s get to know what Blockchain Mining is.
What is Blockchain Mining?
Blockchain Mining is a process used to validate new transactions. Different Blockchain implementations use different methods for validation. In this blog, I will explain an example of Bitcoin Mining. When new Blockchain transaction happens, before adding these transactions to the Block, all the miners participating in mining are given a mathematical problem. This mathematical problem is a difficult problem based on the hash algorithm which is solvable only by Brute-force.
The only way to solve this problem is to check for each possible solution to see if it is right, no shortcuts work. Finding the solution doesn’t require intelligence, it just requires faster computational speed. The solution to the mathematical problem is called Proof-of-Work. The Proof-of-Work, as the name suggests is the proof that the miner has spent the time and resources to find the solution. As mentioned previously, Blockchain mining requires a lot of resources. And for spending the time and resources for this, the miner receives a reward called Mining reward.
Now that you have understood what Blockchain Mining is, let’s see how it works in the real world.
How does Blockchain Mining work?
Blockchain Mining is mostly impossible with normal Desktop and it requires special hardware that has faster computational speed. There are two ways that mining happens: Individual Mining and Mining Pools.
Individual Mining
Here, each miner will set up the hardware and register himself for mining. When new transactions happen, all the miners in that Blockchain network receive a mathematical problem. The miners’ hardware starts working on finding the solution for it. The first miner to find the solution informs all the other miners that he has found the solution. The other miners then verify it to avoid false validation of the Block. Once the solution of the miner is verified, the miner gets the reward and the transactions are added to the Blockchain.
Mining Pool
Some times, a single miner does not have enough resources to mine the Blockchain. In such cases, a group of miners come together to form a Mining Pool. These miners combine their resources to mine the Blockchain faster. Similar to Individual Mining, the Mining Pool gets the problem and on successfully solving it, they get the reward. This reward is divided among the miners depending on how much resources they have contributed.
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