Mining (mining) is the process of confirming transactions and creating new blocks in a blockchain, for which network participants receive a reward in the form of coins. To do this, equipment solves complex cryptographic tasks based on the Proof-of-Work consensus algorithm. Whoever first finds the correct solution adds a new block to the chain and receives the reward.
Mining performs several functions at once: it ensures the security and decentralization of the network, confirms the correctness of transactions and regulates the issuance of new coins. This is exactly how the issuance of Bitcoin, Litecoin and a number of other cryptocurrencies built on this principle works.
What is used to mine cryptocurrency
- Ordinary computers and graphics cards — for algorithms sensitive to computational power.
- Mining farms — clusters of several devices to increase performance.
- ASIC — specialized devices tailored to a specific algorithm.
In addition to hardware, miners need software that manages the calculations and the connection to the network or pool. Mining difficulty changes over time and depends on the total power of the network: the more participants there are, the higher the competition for the reward. The cost of electricity should also be taken into account, as it largely determines the economic viability of mining.
