Cryptocurrency mining is something that isn’t new to anyone who is into blockchain and cryptocurrency… in fact, it is usually one of the first things to come across when people discover blockchain and cryptocurrency. But before go deep into the main topics of this post, I will like to briefly explain what cryptocurrency mining is and what it is all about…
This is a very interesting question because not everyone understand what cryptocurrency mining really means. Yes most people who come into the blockchain and cryptocurrency space often hear or come across cryptocurrency mining and begin to scratch their heads trying to understand what it is all about. Mining in cryptocurrency terms is simply the process in which the nodes add a new block of transactions to the existing blockchain network.
In simple terms, cryptocurrency mining is simply a process of verifying transactions, minting new coins and adding new block of transaction on the blockchain network. Bitcoin mining is the most popular and oldest form of cryptocurrency mining and is still very popular today. Over the years cryptocurrency mining have become very profitable that there are a lot of miners who are not only securing the blockchain network but also minting new coins and continuously verifying transactions on the blockchain to ensure they are legit. Cryptocurrencies like bitcoin, litecoin, ethereum are a typical examples of blockchains that involves mining.
Delving into how mining works - Whenever we talk of a miner in cryptocurrency, it is simply a node in the blockchain network as a blockchain is basically a connection of nodes that form the infrastructure of a blockchain. So what this means is that the miners who are the nodes in the network collects transactions and solving complex mathematical puzzles inoder to organize the transactions into blocks. When transactions are sent on the blockchain, miners nodes receive the transactions and also verify the transactions and add them into blocks. Cryptocurrency mining requires special equipments and computational power in order to solve the complex mathematical puzzles as fast as possible so as to create a new block. Miners compete among themselves to become the first to solve the complex puzzle and verify transactions in order to create new block.
Discussing the Challenges that crypto Miners face, Even though cryptocurrency mining is great and is essential for the blockchain network and we have seen miners continue to increase all over the world, there are difficulties and challenges that come with it… there are quite a number of challenges that cryptocurrency miners face but I will be touching on a few of them…
High energy consumption: - This is one of the major challenged faced by miners in the cryptocurrency space. Let’s take bitcoin mining for instance, mining bitcoins require a great deal of high energy consumption due to the computational needs required to solve the mathematical problem that is in order to verify transactions and create new blocks on the blockchain network. Because of this, a lot of energy is being used by the mining equipments due to how hard the machines have to work to solve these mathematical problem. This high energy consumption increases the cost of power.
Price Volatility: - We all know that cryptocurrency in general is highly volatile at least for now. Cryptocurrency miners are rewarded from the new coins generated from the blockchain for verifying transactions on the block. Also, mining cryptocurrency and verifying transactions on the block is capital intensive and requires a substantial amount of investment… and since cryptocurrency is volatile, this cause the price to fluctuate, meaning that there is a possibility that the mining efforts by the miners might not be worth it to cover the cost of operating and maintaining the mining equipments. This becomes a huge challenge for miners. the volatility in price of cryptocurrency becomes a problem for miners to maintain mining equipments.
Mining has always been tough and expensive.