First thing you should know; the process of producing cryptocurrency is absolutely nothing like the process of making regular money. The main difference is there is no physical money…in fact there is no central authority to even issue it. Instead, Bitcoin, Litecoin, and most other alt-coins are generated through the process of cryptomining.
So what exactly is cryptomining…and how does it work?
Before getting into nitty gritty details of cryptomining, you need to understand what the blockchain is and how it works. Blockchain technology supports pretty much every cryptocurrency you’ll encounter. Essentially, it’s a decentralized public ledger that records every transaction performed in whatever cryptocurrency you’re dealing with.
Via the blockchain, these transactions are assembled into so-called “blocks” which are then verified by cryptominers (that’s you!) to make sure the same coin wasn’t previously spent and that both the input and output expenses match up. After that, the next sequential transaction block is connected to this previous block — hence the name blockchain.
Because there is no central authority like you’d find at a bank, for instance, there needs to be a mechanism for gathering each transaction together to build a new block. We call the network nodes that carry out this important task “miners.” Every time a group of transactions are combined to form a block, that block is then added to the blockchain. And whichever miner adds it gets rewarded with a small fraction of that cryptocurrency.
Sounds easy, right? Well, sort of…
To prevent currency devaluation caused by miners building, well, A LOT of blocks, their job is made more difficult with complicated mathematical problems called “proof of work” that the miners must solve in order to collect their reward.
In order to build a block successfully, a cryptographic hash meeting certain criteria needs to accompany it. The only way to get a hash with the correct criteria is to calculate the possibilities until you get a match. When the correct hash is determined, a brand new block is formed and the miner who found it gets their reward. The faster a miner can calculate possibilities the more likely they are to win the reward.
Long story short, a miner is competing against other miners to calculate as many hashes as they can. Its like survival of the fittest; Fin-tech Edition.
With each new block of coins it becomes harder to mine whichever cryptocoin you’re dealing with which, in theory, ensures that the rate new blocks are built remains relatively steady. Often, cryptocurrencies also have a limited number of units that can ever be mined. With Bitcoin that number is 21 million. After the final Bitcoin is mined a new block won’t generate anything.
The massive influx of cryptominers in recent years has led to a need for higher quality hardware… and lots of it. A few years ago you could start a cryptomining operation with nothing more than a reasonably powerful processor; now you need, at minimum, several GPUs working in together or a specialized set-up with hardware that is specifically configured with cryptomining in mind. This is where the expertise of Northway Mining becomes a valuable asset for our customers.
In order to compete with larger, more industrialized mining operations you need to have equipment capable of processing such a huge number of calculations in a short period of time and the know-how to put that equipment to work.
That’s where we come in.
Organizations of all sizes are heavily investing in the industrialization of cryptomining and they have the massive profits to show for it. Northway Mining is at the forefront of this movement — and you can be, too.