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Mining the cryptocurrency. How it works

17 August 2017 13:20, UTC

Mining is the process of obtaining cryptocurrency in the virtual space. In a real life, to get money, you need to do some kind of a transaction and get paid for it. In the Internet, to receive coins of cryptocurrency, a market participant must calculate a “hash” (a unique checksum). It is calculated by a complex mathematical algorithm. When the number of market participants is going to increase, the algorithm of the next hash calculation is getting more complicated.

Mining features

Fiat money is issued by the state or, in rare cases, private centralized banking institutions. Cryptocurrency is not controlled by any of the official organizations that exist in the world.
The number of cryptocurrency coins, which will be issued the next time, is predetermined in advance. Therefore, you can get either the entire volume of emissions or nothing. These coins don’t have a physical embodiment, but an encrypted code, the cost of which is determined by market demand. To get the coin, the participant has to be the first to calculate the hash sum.

At the dawn of its history mining was much simpler – people just dealt with it using ordinary personal computers. Later, with the increase of number of “miners” (persons who mine coins), the algorithms for calculating the hash sums became more complicated. For their calculation, prominent power computers needed to be required. In particular, the miners began to use computer graphics cards that cope with mathematical tasks faster and spend less energy.

Can I mine the cryptocurrency?

You can mine the cryptocurrency on your own. To do this, you will need to lash out heavily on a high-end video card for your personal computer or even create a special “mining farm” – a high-performance specialized computer system. There is also an option to become a part of the “miners pool” – a group of participants who combine the capacities and means, and in case of obtaining a cryptocurrency, the coins are divided among themselves in proportion to the contribution to the result.

Mining trends and the future

Nowadays trend is in the formation of production pools, which use special equipment, the function of which is designed only to count hash sums. In this regard, the numbers of those who mined coins with farms, as well as the number of singles, is seriously reduced. This happens due to the constant complication of the algorithm used to encode information about the next issue of coins and since mining is a competitive process ( first calculated – first received coins), then you need to increase the capacity of equipment for calculation.

The most difficult thing is to mine bitcoins – and for this purpose, both new technologies of calculation and equipment are being developed. But there are other cryptocurrencies which are much easier to get, but their cost is not so great as that of bitcoins – they are less demanded. They include lightcoins, etherium, z-cash and others. They use a simpler calculation algorithm for today.

Cryptocurrency prospects are really large. If bitcoin, which appeared in 2009, cost slightly less than one US dollar, then in the spring of 2017 its value approached the price of an ounce of gold (1200 USD), and by early summer of 2017 it increased to $ 2,000. Proceeding from the forecasts about the development of the cryptocurrency, inflation of coins is impossible because the system works by the principle: the higher the speed of hash-sum calculation – the fewer coins are produced. The system will reach its peak only in the 2140s.