Welcome back to Liracoin Academy, today we’ll
talk about
What is cryptocurrency mining?
Cryptocurrency mining is one of the key elements
that allow cryptocurrencies to work
as a peer-to-peer decentralized network without
the need of a third party central authority.
In order for a new block of transaction to
be added to the blockchain, it has to be checked,
validated and encrypted.
This procedure is called mining and is done
by the miners.
Mining therefore has a role of system monitoring
and maintenance.
There are many types of mining, proof-of-work
(POW) e il proof-of-stake (POS) being the
most used. The aim is the same, the difference
is the algorithm under which they operate
and the name attributed: in the proof-of-stake,
the mining activity is called forging and
is done by the validators.
“The mining activity has two purposes:
1. verifying the legitimacy of a transaction,
avoiding the double expense of a user spending
coins a second time;
2. introducing new coins into the existing
circulating supply.”
“How does it work?
A miner is a node within the network that
collects transactions”
and operates to arrange them in blocks.
When transactions are performed, the node
miners receive and validate them.
The first stage of the mining process is to
produce the hash for each transaction contained
in the memory pool,
that is to say data that identifies and constitutes
the content of the block.
The node generating the hash transmits the
block to the network. All other nodes check
if the hash is valid and, if so, add the block
to its blockchain copy, then they move forward
with the next block.
The miners start to work on the next block
based on the hash previously received, establishing
a consequential link between the blocks.
The miners who discover the valid hash are
rewarded for their mining.
Why is this activity rewarded? Because the
miner contributes to the security of the system
by verifying the transactions.
The reward of the miners is based on the distribution
of new coins generated for every block, and
divided by the transactions fees. For example,
today in 2019, 12.5 bitcoin are divided between
the miners for every new block, transaction
fees not included.
In the following video we will show you how
proof-of-work (POW) and proof-of-stake (POS)
work and which one is the best solution for
the miner and the network.
Keep up with Liracoin Academy!