Most all cryptocurrencies record transactions by using blockchain technology or a similar DAG Directed acyclic graph technology to record transactions. To operate with the blockchain, cryptocurrencies use miners to link each transaction or block into a chain. This allows for each transaction to be accounted for on the same platform, making everything uniform. This is what creates the decentralized nature of the currencies. Bitcoin is the coin that made people aware of the possibility of mining; however, any coin that uses the bases of blockchain on a proof of work chain can be mined the other alternative is Proof Of Stake (we’ll talk about this later).
Mining is just verifying the list of transactions on the blockchain. Someone who verifies that the transactions are accurate is rewarded with a specific currency. Set up the computers to solve the verification equations and complete the chains. When a transaction is made, miners first began by making sure the transaction is valid through running it through a series of tests. Next the data is put into a memory pool where the miner then pulls the information from. Once the miner has the data, the race begins to race to solve a set of complex equations through a computer called a hash function. In simplicity, a hash function is a algorithm that takes different length inputs (which are the transactions) and creates an output that is of all the same lengths. Here is an example of a simple hash function:
hello ==> 2cf24dba5fb0a30e26e83b2ac5b9e29e1b161e5c1fa7425e73043362938b9824
goodbye ==> 82e35a63ceba37e9646434c5dd412ea577147f1e4a41ccde1614253187e3dbf9
In order to solve one of these functions, the computer just keeps making guesses until it is correct.
For a person to mine cryptocurrencies, it takes more than a computer. In order to successfully mine, many people create mining rigs. Each rig consists of five to six graphic cards. The mining rigs take a lot of power/electricity, which can be quite expensive. The power of a graphic card is determined by the hash rate and power consumption. The hash rate is determined by how fast the graphic card can solve the hash functions. Miners have a decision to make between conserving power, while still having a fast hash rate. It is all about finding the perfect balance. In addition to power and hash rate, it is important to run them in a cool environment. The colder the environment the faster the processing power.
In addition to miners, the process also needs nodes to double-check and validate. Nodes are important members that move data, such as payments and additions to the blockchain, around the network. While the information is passed around, it is checked by other nodes on the network. Nodes differ from miners because the miners are doing the raw work of attacking the transactions to the blockchain, and the Nodes are the validators. When a transaction is validated and a block is complete all the nodes around the system in the web are updated, which creates the decentralization and the data is held in all the seperated locations instead of in one central location.