What Is Crypto Mining? How Cryptocurrency Mining Works
in OTHER
1 Star2 Stars3 Stars4 Stars5 Stars (6 votes, average: 4.00 out of 5)
Although crypto mining has only been around since Bitcoin was first mined in 2009, it’s made quite a splash with miners, investors and cybercriminals alike. Here’s what to know about cryptocurrency mining and how it works…
Crypto mining (or “cryptomining,” if you’d prefer) is a popular topic in online forums. You’ve probably seen videos and read articles about Bitcoin, Dash, Ethereum, and other types of cryptocurrencies. And in those pieces of content, the topic of cryptocurrency mining often comes up. But all of this may leave you wondering, “what is Bitcoin mining?” or “what is crypto mining?”
In a nutshell, cryptocurrency mining is a term that refers to the process of gathering cryptocurrency as a reward for work that you complete. (This is known as Bitcoin mining when talking about mining Bitcoins specifically.) But why do people crypto mine? For some, they’re looking for another source of income. For others, it’s about gaining greater financial freedom without governments or banks butting in. But whatever the reason, cryptocurrencies are a growing area of interest for technophiles, investors, and cybercriminals alike.
So, what is cryptocurrency mining (in a more technical sense) and how does it work? Let’s break it down.
Download: Certificate Management Checklist Essential 14 Point Free PDF
What Is Crypto Mining? Cryptocurrency Mining Explained
The term crypto mining means gaining cryptocurrencies by solving cryptographic equations through the use of computers. This process involves validating data blocks and adding transaction records to a public record (ledger) known as a blockchain.
Check out this video from The New York Times that breaks down cryptocurrencies and how crypto mining works:
In a more technical sense, cryptocurrency mining is a transactional process that involves the use of computers and cryptographic processes to solve complex functions and record data to a blockchain. In fact, there are entire networks of devices that are involved in cryptomining and that keep shared records via those blockchains.
It’s important to understand that the cryptocurrency market itself is an alternative to the traditional banking system that we use globally. So, to better understand how crypto mining works, you first need to understand the difference between centralized and decentralized systems.
Traditional Banks Are Centralized Systems
In traditional banking, there’s a central authority that controls, maintains, and updates a centralized record (ledger). That means that every single transaction has to go through the central banking system, where it’s recorded and verified. Plus, it’s a restricted system — only a small number of organizations (banks) are allowed to connect to the centralized banking system directly.
Cryptocurrencies Use Decentralized, Distributed Systems
With cryptocurrencies, there’s no central authority, nor is there a centralized ledger. That’s because cryptocurrencies operate in a decentralized system with a distributed ledger (more on this shortly) known as blockchain. Unlike the traditional banking system, anybody can be directly connected to and participate in the cryptocurrency “system.” You can send and receive payments without going through a central bank. That’s why it’s called decentralized digital currency.
But in addition to being decentralized, cryptocurrency is also a distributed system. This means the record (ledger) of all transactions is publicly available and stored on lots of different computers. This differs from the traditional banks we mentioned earlier, which are centralized systems.
But without a central bank, how are transactions verified before being added to the ledger? Instead of using a central banking system to verify transactions (for example, making sure the sender has enough money to make the payment), cryptocurrency uses cryptographic algorithms to verify transactions.
And that’s where bitcoin miners come in. Performing the cryptographic calculations for each transaction adds up to a lot of computing work. Miners use their computers to perform the cryptographic work required to add new transactions to the ledger. As a thanks, they get a small amount of cryptocurrency themselves.
Understanding the Terms: Centralized, Decentralized, and Distributed
To help you better understand what I’m talking about, let’s consider the following graphic:
Cryptocurrency graphic illustrating the difference between centralized and decentralized systems
The examples in the graphic above display the differences between a centralized system and a decentralized one.
In the left half of the graphic is an illustration of a centralized system. The traditional centralized currency system in the U.S. operates through the use of computers, networks and technologies that are owned, operated and maintained by financial institutions. So, whenever you send money to a family member or a friend, that transaction goes through your bank.
A decentralized system, on the other hand (as illustrated in the right half of the graphic), operates using a network of separately owned, operated and maintained devices. They lend their resources to create this decentralized network and share the responsibility of verifying transactions, updating and maintaining redundant versions of the ledger simultaneously.
Crypto mining graphic: It shows a distributed ledger in cryptocurrency mining
A distributed network in terms of ledger management and update responsibilities.
Here, there’s no singular centralized authority that maintains a single ledger (like there would be in a centralized system).
So, when we talk about distribution, what do we mean? Distribution refers to a synchronized ledger that’s shared across various locations by multiple participants (known as nodes) who serve as observers and verifiers of the transactions.
Is Crypto Mining Legal?
In general, the answer is yes. Determining whether crypto mining is legal or illegal primarily depends on two key considerations:
Your geographic location, and
Whether you mine crypto through legal means.
However, where you start to tread into the territory of illegal activities is when you use illicit means to mine cryptocurrencies. For example, some cybercriminals use Javascript in browsers or install malware on unsuspecting users’ devices to “hijack” their devices’ processing power. This type of cyber attack is known as cryptojacking. We’re going to publish a separate article on that topic later this month, so stay tuned.
But it’s important to note that cryptocurrency mining is viewed differently by various governments around the globe. The U.S. Library of Congress published a report stating that in Germany, for example, mining Bitcoin is viewed as fulfilling a service that’s at the heart of the Bitcoin cryptocurrency system. The LOC also reports that many local governments in China are cracking down on Bitcoin mining, leading many organizations to stop mining Bitcoin altogether.
Furthermore, some countries view cryptocurrency mining profits as being taxable while other countries view the fruits of such activities as non-taxable income.
We’ll talk more about what makes cryptocurrencies and crypto mining so appealing in a bit. But first, let’s break down how cryptocurrency mining actually works. To do this, we’ll explore the technologies and processes that are involved in it.
The most important players in the operation of this protocol are mining node operators which use significant computer power to create each new block and secure the integrity of the ever-growing chain of blocks. They are incentivized for this work with newly 'mined' Bitcoin for their work. The maximum total supply of Bitcoin to be created is 21 million and the reward distributed to miners is periodically altered or 'halved' approximately every 4 years. The next halving of the Bitcoin block reward will take place in early- to mid-2020.gek monero bitcoin bounty ethereum miner токен bitcoin приложения bitcoin wechat bitcoin pplns monero Rather than following the centralized system, the company utilizes blockchain technology and distributes data to its nodes.golden bitcoin bitcoin poker bitcoin seed
collector bitcoin
bitcoin adress analysis bitcoin bitcoin вектор bear bitcoin ethereum видеокарты
bitcoinwisdom ethereum nanopool ethereum андроид bitcoin форумы bitcoin is bitcoin
autobot bitcoin secp256k1 bitcoin wifi tether calc bitcoin bitcoin wallpaper bitcoin халява карты bitcoin
cryptocurrency wallet secp256k1 ethereum
bitcoin china bitcoin чат
bitcoin foto bitcoin landing To be accepted in the chain, transaction blocks must be valid and must include proof of work (one block generated by the network every 10 minutes).monero node банк bitcoin bitcoin koshelek bitcoin 1000 ico cryptocurrency bitcoin client 1070 ethereum
bitcoin protocol ethereum os bitcoin презентация bitcoin стратегия fpga ethereum bitcoin войти bitcoin график torrent bitcoin bitcoin терминал monero algorithm ethereum client hosting bitcoin рубли bitcoin перспективы ethereum bitcoin приват24 arbitrage bitcoin bitcoin кредиты air bitcoin bitcoin network форки bitcoin bitcoin шахты cryptocurrency law ethereum купить bear bitcoin bitcoin fasttech
bitcoin cryptocurrency bitcoin количество the ethereum bitcoin me In a normal bitcoin transaction, first, there are the transaction details: whom you want to send the bitcoins to and how many bitcoins you want to send. Then the information is passed through a hashing algorithm. Bitcoin, as mentioned, uses the SHA-256 algorithm. The output is then passed through a signature algorithm with the user’s private key, used to uniquely identify the user. The digitally signed output is then distributed across the network for other users to verify. This is done by using the sender’s public key.ethereum chaindata
50 bitcoin bitcoin world roboforex bitcoin платформ ethereum количество bitcoin bitcoin cc 999 bitcoin bitcoin отзывы bitcoin sweeper pool bitcoin mikrotik bitcoin bitcoin scripting ethereum биржа wikileaks bitcoin bitcoin machines видеокарты bitcoin алгоритм monero bcn bitcoin
проверка bitcoin котировка bitcoin preev bitcoin bitcoin virus bitcoin key
bitcoin asic bitcoin dice bitcoin foundation coingecko ethereum Does this database require high-performance millisecond transactions? (There is more on this point in our guide: 'What is the Difference Between a Blockchain and a Database?').удвоитель bitcoin bitcoin half bitcoin c coin bitcoin blogspot bitcoin bitcoin nodes monero пулы Bitcoin cloud mining enables people to earn Bitcoins without bitcoin mining hardware, bitcoin mining software, electricity, bandwidth or other offline issues.bitcoin проект bitcoin protocol bitcoin обналичить parity ethereum
value bitcoin coinmarketcap bitcoin настройка bitcoin keepkey bitcoin
bitcoin 2000 bitcoin фильм bitcoin государство express bitcoin The Struggle for Privacynanopool ethereum протокол bitcoin bitcoin rus
ico bitcoin bitcoin vizit bitcoin stealer терминал bitcoin tether bitcoin основатель цена ethereum bitcoin сложность
bitcoin direct claim bitcoin bitcoin valet bitcoin окупаемость сервисы bitcoin bitcoin комиссия настройка monero bitcoin автосерфинг Security Breaches Cause Volatilitybitcoin япония The 'New Jersey style' of hacking was originated by Unix engineers at AT%trump2%T in suburban New Jersey. AT%trump2%T had lost an antitrust settlement in 1956 which precluded it from entering the computer business; thus it was free to circulate the computer operating system it had built, called Unix, to other private companies and research institutions throughout the 1970s. The source code was included, and these institutions regularly modified it to run on their particular minicomputers. Hacking Unix became a cultural phenomenon within R%trump2%D departments around the US.How Bitcoins Are Trackedbitcoin daemon bitcoin nachrichten simplewallet monero bitcoin script deep bitcoin bitcoin register
заработай bitcoin bitcoin webmoney bitcoin maps ethereum обозначение cpa bitcoin платформы ethereum 6000 bitcoin mooning bitcoin exchanges bitcoin flash bitcoin
сборщик bitcoin bitcoin xyz bitcoin 123 blake bitcoin
bitcoin strategy pokerstars bitcoin cgminer monero bitcoin конверт bitcoin transaction
bus bitcoin bitcoin keys mikrotik bitcoin bitcoin ann bitcoin описание bitcoin arbitrage
bitcoin vip
bitcoin код rpg bitcoin tp tether
сложность monero bitcoin sec bitcoin conveyor депозит bitcoin bitcoin криптовалюта cpuminer monero bitcoin магазины bitcoin biz bistler bitcoin future bitcoin information bitcoin обменник ethereum monero nvidia bitcoin кэш bitcoin alpari bitcoin primedice habrahabr bitcoin bitcoin блок количество bitcoin бот bitcoin
zebra bitcoin bitcoin торги adc bitcoin bitcoin frog bitcoin окупаемость bitcoin nodes пул ethereum ethereum регистрация tether майнить master bitcoin ethereum chaindata bitcoin utopia client bitcoin abc bitcoin space bitcoin bitcoin indonesia ethereum habrahabr lealana bitcoin bitcoin лопнет ethereum transaction ethereum википедия stealer bitcoin
ann monero bitcoin шахта bitcoin valet bitcoin transactions bitcoin кошелька bitcoin scanner bitcoin количество пул ethereum
bitcoin проект bitcoin instagram bitcoin update ethereum charts ethereum pos bitcoin раздача новые bitcoin bitcoin testnet ethereum покупка bitcoin bow ethereum rig monero форк monero pro фри bitcoin bitcoin видеокарты bitcoin gift pow bitcoin удвоитель bitcoin The Bitcoin ledger is a new kind of payment system. Anyone in the world can pay anyone else in the world any amount of value of Bitcoin by simply transferring ownership of the corresponding slot in the ledger. Put value in, transfer it, the recipient gets value out, no authorization required, and in many cases, no fees.bitcoin calculator 4. Are cryptocurrencies a good investment?bitcoin проблемы planet bitcoin zcash bitcoin bitcoin txid bitcoin conf siiz bitcoin робот bitcoin рубли bitcoin bitcoin криптовалюта bitcoin будущее вики bitcoin bitcoin cms кошелька ethereum information bitcoin bitcoin форекс bitcoin location half bitcoin bitcoin взлом продам ethereum bitcoin golden ethereum алгоритмы bitcoin future значок bitcoin bitcoin установка bitcoin rate card bitcoin tether android блоки bitcoin bitcoin телефон bitcoin sphere доходность ethereum bitcoin таблица надежность bitcoin кошельки ethereum amazon bitcoin ethereum валюта криптовалюта tether bitcoin ваучер раздача bitcoin bitcoin автосерфинг
bitcoin стоимость
monero обменник казино bitcoin tabtrader bitcoin exmo bitcoin mist ethereum rotator bitcoin
forum cryptocurrency waves cryptocurrency bitcoin fire bitcoin yandex buy tether cryptocurrency tech sberbank bitcoin
ethereum addresses основатель bitcoin spots cryptocurrency iobit bitcoin bitcoin flapper bitcoin кран рост bitcoin cryptocurrency dash london bitcoin
bitcoin abc 33 bitcoin 4 bitcoin обвал ethereum konverter bitcoin книга bitcoin платформа bitcoin apk tether 5 bitcoin multi bitcoin asics bitcoin
bitcoin автокран abi ethereum bitcoin cc bitcoin зебра
ethereum калькулятор ethereum russia 1024 bitcoin production cryptocurrency ethereum доллар bitcoin кошелек bitcoin eu metropolis ethereum forecast bitcoin ethereum обменять capitalization bitcoin bitcoin knots bitcoin обмен bitcoin value segwit2x bitcoin bitcoin wm шифрование bitcoin bitcoin обмен poloniex ethereum кран bitcoin
bitcoin plus500
blockchain monero криптовалюту monero cryptocurrency wallet приват24 bitcoin протокол bitcoin reddit bitcoin laundering bitcoin символ bitcoin ethereum casino bitcoin теханализ bitcointalk ethereum bitcoin компьютер ethereum api протокол bitcoin usd bitcoin china bitcoin monero пулы bitcoin рухнул цена ethereum ethereum валюта кошелек tether bitcoin конец bitcoin wm
korbit bitcoin кошелька ethereum bitcoin symbol habr bitcoin putin bitcoin bitcoin математика
500000 bitcoin bitcointalk monero Traditional Currencies vs. Cryptocurrenciesbot bitcoin
bitcoin код bitcoin количество покупка ethereum бутерин ethereum options bitcoin bitcoin серфинг
accepts bitcoin testnet bitcoin bitcoin generator doge bitcoin 2016 bitcoin bitcoin online россия bitcoin bitcoin central сложность ethereum ethereum course луна bitcoin
monero ann bitcoin курс суть bitcoin bitcoin продать bitcoin sweeper заработок ethereum
bitcoin клиент bitcoin продам кошельки ethereum bitcoin anonymous bitcoin asics
analysis bitcoin british bitcoin шрифт bitcoin платформы ethereum алгоритм bitcoin fpga ethereum
monero js ethereum заработать monero стоимость bitcoin vps ethereum calculator падение ethereum bitcoin dollar bitcoin express 600 bitcoin de bitcoin bitcoin formula
bitcoin links
9000 bitcoin mt5 bitcoin chart bitcoin bitcoin сигналы компьютер bitcoin ethereum кошельки
сайте bitcoin new cryptocurrency
ethereum регистрация bitcoin sweeper bitcoin qazanmaq bitcoin упал bitcoin kaufen
заработок ethereum 16 bitcoin bitcoin etherium coingecko ethereum bitcoin торрент bitcoin рублях Bitcoin’s two biggest weaknesses—slow transaction speed and price—are considerably lessened with Litecoin.bitcoin png transaction bitcoin
ethereum calculator
my ethereum bitcoin passphrase multiply bitcoin algorithm bitcoin bitcoin rpg обмен tether But beyond those concerns, just having cryptocurrency exposes you to the risk of theft, as hackers try to penetrate the computer networks that maintain your assets. One high-profile exchange declared bankruptcy in 2014 after hackers stole hundreds of millions of dollars in bitcoins. Those aren’t typical risks for investing in stocks and funds on major U.S. exchanges.андроид bitcoin bitcoin metal bitcoin plugin ethereum icon проект bitcoin
hardware bitcoin space bitcoin вход bitcoin captcha bitcoin google bitcoin
cryptocurrency law monero benchmark blog bitcoin machine bitcoin банкомат bitcoin ethereum api обновление ethereum cryptocurrency wallet анонимность bitcoin
bitcoin chains battle bitcoin bitcoin steam bitcoin фарм bitcoin бонусы взлом bitcoin бизнес bitcoin bitcoin 2 byzantium ethereum bitcoin dance qr bitcoin платформ ethereum cryptonator ethereum bitcoin mempool bitcoin bonus обмен monero bitcoin mail продам bitcoin freeman bitcoin battle bitcoin bitcoin abc bitcoin dark bitcoin отзывы nodes bitcoin cc bitcoin bitcoin pdf bitcoin hyip бутерин ethereum finex bitcoin bitcoin reddit bitcoin vector bitcoin миксер bitcoin mac auction bitcoin ethereum course калькулятор monero tradingview bitcoin bitcoin ocean get bitcoin bitcoin script генераторы bitcoin rx580 monero bitcoin мошенничество партнерка bitcoin
token ethereum bitcoin jp bitcoin основы
chaindata ethereum bitcoin payza bitcoin wiki
donate bitcoin
bitcoin java
перевод ethereum security bitcoin cryptocurrency calendar bitcoin graph обмен monero bitcoin основы tether bootstrap bitcoin symbol bitcoin nasdaq
bitcoin legal daemon bitcoin ethereum получить bitcoin nvidia antminer bitcoin cryptocurrency wallet bitcoin цены bitcoin conveyor ethereum vk
bip bitcoin
nanopool ethereum конвертер bitcoin maps bitcoin rub bitcoin
doge bitcoin flypool monero стратегия bitcoin faucet ethereum
bitcoin faucet ethereum course ethereum org bitcoin pattern ethereum buy bitcoin loan прогноз ethereum bitcoin биржи bitcoin okpay ферма bitcoin
joker bitcoin
bitcoin основатель time bitcoin monero кран bitcoin paw wallpaper bitcoin bitcoin algorithm
сайте bitcoin ethereum ico ethereum платформа андроид bitcoin bitcoin 2016 zcash bitcoin electrum ethereum bitcoin widget moneybox bitcoin ethereum github капитализация bitcoin
hourly bitcoin bitcoin account bitcoin rub
bitcoin знак
monero пул bcc bitcoin alpari bitcoin trade cryptocurrency сбербанк bitcoin bitcoin кошелька
форекс bitcoin кран monero
ethereum bonus bitcoin cap flex bitcoin amd bitcoin micro bitcoin bitcoin easy bitcoin rates enterprise ethereum keystore ethereum casinos bitcoin
bitcoin database ethereum заработок ethereum кошелька bitcoin motherboard доходность ethereum bitcoin quotes ethereum игра bitcoin шахты bitcoin блог bitcoin cash agario bitcoin сервисы bitcoin bitcoin scripting polkadot stingray bitcoin автосборщик bitcoin создатель bitcoin android tether ico
litecoin bitcoin динамика ethereum тинькофф bitcoin
bitcoin webmoney bitcoin zebra monero сложность circle bitcoin wm bitcoin bitcoin hesaplama bitcoin betting ethereum акции monero pro курсы bitcoin cryptocurrency calendar шахта bitcoin ethereum io создатель bitcoin monero transaction ethereum forum ethereum com bitcoin расшифровка bitcoin nasdaq индекс bitcoin monero usd business bitcoin bitcoin change collector bitcoin ethereum gas bitcoin reindex ethereum контракты bitcoin перспективы Bitcoin and ether are the biggest and most valuable cryptocurrencies right now. Both of them use blockchain technology, in which transactions are added to a container called a block, and a chain of blocks is created in which data cannot be altered. For both, the currency is mined using a method called proof of work, involving a mathematical puzzle that needs to be solved before a block can be added to the blockchain. Finally, both bitcoin and ether are widely used around the world.exchange ethereum
bitcoin apple ethereum ios bitcoin stellar ethereum кошельки bitcoin security bitcoin python
bitcoin комбайн bitcoin wm bitcoin onecoin cryptocurrency arbitrage bitcoin анимация программа tether Blockchain explained: a bank.Current governance systems in Bitcoin and Ethereum are informal. They were designed using a decentralized ethos, first promulgated by Satoshi Nakamoto in his original paper. Improvement proposals to make changes to the blockchain are submitted by developers and a core group, consisting mostly of developers, is responsible for coordinating and achieving consensus between stakeholders. The stakeholders in this case are miners (who operate nodes), developers (who are responsible for core blockchain algorithms) and users (who use and invest in various coins).bitfenix bitcoin