After the high valuation of the crypto-coins during the past year, several people became interested in this market and, consequently, many doubts arose from this new public, that until then had never heard about the subject. The crypto-mining theme is one of the most controversial subjects among crypto universe enthusiasts, and that's why Easy Cryptomoedas has set up an easy guide for you to finally understand what it means and how it works.
To understand mining, we first need to understand what a crypto is, how it works, and a host of other concepts. Below is a brief explanation of these basic concepts:
Cryptomoeda is, in other words, a digital currency that uses cryptography. These "coins" are registered in virtual addresses that are called "wallet". They can be transferred from one wallet to another at any time by their owners. These transfers are called transactions and are recorded in a structured way in what we call blocks. These blocks are interconnected in sequence, one to the other, forming a chain of blocks, which we call "blockchain".
Blockchain is a kind of database that functions as a public accounting book, in which any transaction can be queried at any time by users. The difference is that the blockchain system causes the blocks to be encrypted in a way linked to each other, ensuring that their data is immutable, because to modify a transaction would have to modify the entire subsequent block chair.
In addition, the blockchain is not stored in a specific location and much less processed centrally. A blockchain is a P2P network, similar to the torrent, where the users themselves serve as "nodes" for the network, that is, they replicate the information to the other users. In this process of encryption and registration of the transactions in the blocks of blockchain is that the work of the miners enters.
What is the work of the miners?
Miners provide the computing power needed to find the key that encrypts the blocks and also logs their transactions. This key is called a hash and this process is not done in a linear fashion. The task of finding the hash is done by solving calculations that validate transactions, this is done simultaneously by all miners with each new block. Whenever the correct hash is found, and the result is posted on the network, it receives a reward for the work. From there, all miners start working on the hash resolution of the next block. This is how the miner is remunerated: each block offers a fixed reward to the miner it has found and also a complementary value that refers to the fees charged to register those transactions.
How does the difficulty of finding a block work?
Because the number of blocks is fixed in a certain amount of time and the coin network adjusts the difficulty automatically for this to always happen, it is understood that the higher your computing power, the greater chance you will find a block. Consequently, the more miners doing this work at the same time, the greater the difficulty of finding blocks in the network of this coin.
Solution for hard currency
Now imagine in this scenario, you mining alone. You would be "competing" with giant mining companies that have a very high computing power. Your chance to find a bloc probably comes close to zero, especially if you're mining a very popular currency like Ethereum, Bitcoin, and others. This is where the pool system comes in.
Mining Pool
A pool is a kind of cooperative where a company provides a service that can unite the efforts of various miners in the task of finding the blocks, increasing their chances of winning. When finding a block, the pool makes a distribution of the reward, proportional to the participation of each member.
There are many companies that provide this kind of service, but most of them are overseas. This is a problem because your earnings are minimized due to high latency.
Source: www.itpro.co.uk
hiveblocks