How Cryptocurrency Mining Works

Cryptocurrency mining is a process where advanced computers solve complicated math problems that cannot be solved by hand. The computer’s chance of solving the problem is about 1 in 13 trillion. A cryptocurrency miner needs to have the right equipment and a good knowledge of the internet. But this is only the beginning.

Mining starts when the latest exchanges are organized into blocks to resolve complex puzzles. The miner who solves a puzzle first can put the next block in the chain. That allows the miner to receive the reward, which incorporates any charges related to the block’s exchanges.

You can customize the level of difficulty in cryptocurrency mining. With every 2,016 blocks, the level is balanced. This helps ensure that there is a steady level of block discovery. The level of difficulty is customized to the amount of power used for mining. The amount of hashing power that the mining rig contributes will determine the profits for a miner. The more power it contributes, the higher the profits.

This process began in 2009. In the beginning, the central processing unit (CPU) of standard PCs was used to generate the power. However, cryptocurrency mining quickly gained popularity. To make mining more profitable, miners began using graphics processing units (GPUs), which could solve the puzzles and make hashes much faster than CPUs.

Since a higher hashrate is vital to creating a good income, using one GPU became unprofitable. Many miners connected GPUs to create a home mining farm. This allowed users to create higher hashrates. However, the drawback to this was a large power bill.

Many people moved to Field Programmable Gate Arrays (FPGAs), giving them an advantage over GPUs. Anyone still using a CPU fell behind. Then, the price of FPGA mining became more expensive than with GPUs. Miners turned to Application-Specific Integrated Circuits (ASIC) mining, which became commonly used in 2012.

There are only a limited number of bitcoins (BTC) available for mining. Once 21 million have been mined, the supply will be gone. Currently, more than 18 million BTC have been mined. In the beginning, solving one of the problems resulted in 50 BTC. In 2012, it halved to 25 BTC. In 2016, it again halved to its current rate of 12.5 BTC.