Anyone who has been observant will notice that there’s an imminent paradigm shift in the financial sector. Innovative global payment systems are emerging as people seek payment options that offer a high level of security. One of these new solutions that offers security, anonymity, and efficiency is slowly gaining ground among the tech-savvy. Welcome to the world of cryptocurrency, the new, exciting financial system set to take the world by storm.
What is Cryptocurrency?
What exactly is Cryptocurrency? To some, this word is a cliché. To others, they think everything called cryptocurrency is Bitcoin. But crypto transcends Bitcoin. Cryptocurrency is defined as a digital asset that is created and spent online and can be used to facilitate payments from all over the world.
Cryptocurrency allows people to pay for goods or transfer funds without the help of banks or any third-party in fact. This is why it is called the world’s first peer-to-peer system of transfer.
As earlier mentioned, the trend of cryptocurrency is truly disruptive. Hardly will you see anyone who has not heard about Bitcoin. Today, even apart from currencies, the technology that underpins cryptocurrency has extended to other areas; energy and healthcare being some of the most prominent ones.
The blockchain is a cutting edge peer to peer decentralized network that supports the creation of, and transactions relating to cryptocurrencies. It serves as a register for digital transactions. We can simply say that the blockchain is a distributed ledger that records the history of transactions on a particular network. It is what keeps cryptocurrencies secure and allows the anonymous exchange of funds between users.
Current trends have seen cryptocurrency permeate the technological world at an incredible speed, with participants increasing rapidly. Experts are also forecasting that more people will join the trend and learn more about the currency in coming years.
Since cryptocurrencies got popular, it has earned a different reputation from different people, but beyond being the solution to a payment system, cryptocurrency is also an innovation that will continue to change the world.
Have you ever thought of how these cryptocurrencies are made? Remember that it is a digital asset; it is not tangible. So, how do you carry out the creation of new currencies if you cannot mint or print it? Cryptocurrencies are produced through a process referred to as “mining”.
What is Cryptocurrency Mining?
Let us take a brief look into what cryptocurrency mining is and how it happens.
Cryptocurrency mining is the process involved in creating new cryptocurrencies. It is called mining because it is not too different from gold mining. Some cryptocurrencies are hidden away in protocols (like gold is hidden away underground), and requires the effort of miners to bring it “alive”. It is up to the miners to verify and add transaction blocks into the Blockchain network. These miners get rewards in form of cryptocurrencies.
In essence, cryptocurrency mining brings about new cryptocurrency and adds to the Blockchain network. Cryptocurrency miners are those behind the mining of cryptocurrencies. There are two types of mining: Personal mining and cloud mining.
How it Works
To successfully mine cryptocurrency, it is required that you own a high-resource personal computer with a special program that facilitates the computation of algorithms and complex cryptographic problems involved in mining.
The first to successfully verify and add the block to the chain successfully gets a reward for breaking it. The mining process is different for various cryptocurrencies. While it involves the use of simpler mining technologies in some cryptocurrencies, other cryptocurrencies require a more sophisticated technology due to the level of anonymity and security.
If you’re like many other people, one question that’ll be on your mind is, “How can I become a miner and begin to earn rewards?” Well, it is not so easy to do so. Mining is a craft that requires knowledge, skill, resources, and a lot of patience. The rewards are not the most enticing; in fact, they get halved after a certain period.
But still, this article will walk you through some of the important concepts as regards cryptocurrency mining.
Coins like Aeon CPU-based and this means that they cannot be mined using GPU or ASIC. This type of mining is such that it provides a level playing ground for miners around the world, irrespective of location and mining operations.
For those who do not know what a CPU is, it is the part of a computer that houses the processes that go on. This is the same CPU used in mining the coins, creating a possibility for everyone with a computer to be able to mine for this coin.
Most coins that are being mined are done via a graphical processing unit. While an Intel i7 processor equipped with 12 threads will have capabilities like 300 H/s, other GPU like the r9 290× will have a hash rate of 600-900 kH/s. Litecoin is one of the popular coins mined using this way.
As the name implies, a wallet is a place where you store your valuables. But then, you are used to storing valuables like credit cards, cash, keys, etc. How does a wallet apply to a digital asset? That is a million-dollar question, which has a very simple answer.
Cryptocurrency wallets are categorized as hot wallets and cold wallets. Hot wallets are desktop apps, mobile applications, or even online platforms where your cryptocurrency is held safe and secure. A cold wallet, on the other hand, refers to offline storage tools which take the shape of a USB drive or a flash drive. They are equally equipped with safety capacities but we can say their abilities trump that of hot wallets since they are not prone to phishing or hacking.
The process involved in mining cryptocurrency is relatively complex and it is not for the faint-hearted. With the growing popularity and increasing use cases provided by cryptocurrency platforms, there seems to be no going back on the level of profitability that cryptocurrency is about to hit. It is, however, important to state that the cryptocurrency market is very volatile and may go downhill at any time, so new miners are advised to assess the risk well before diving into this vibrant market.