As mentioned before in this module, cryptocurrencies are ‘mined’ through a network of computers which are often known as the peer-to-peer computer. Mining entails solving cryptographic equations by using computers. The process involves validating data blocks and adding transaction records to the blockchain ledger.
Mining generates more cryptocurrencies as well as updates and secures the cryptocurrency network through constant verification of the blockchain ledger.
Who can mine cryptocurrencies?
Well, anyone with a computer and an internet connection can be a miner. However, mining may not always be profitable since it depends on the speed of your computer and the speed of the internet connection available to you. With a slow computer or a slow internet connection, one may end up spending more than what is earned through mining. That is why in most cases mining is done by specialized companies or large groups of individuals. Mining in a group provides the computing power required to make mining profitable.
How are miners encouraged to participate?
Let’s take the example of Bitcoin. The network holds a lottery regularly which encourages miner groups around the world race to solve a math problem first. Each winner gets a bitcoin which finally enters the bigger cryptocurrency network.
The picture below shows the entire mining process.