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What is mining?

BlockchainProof of Stake Proof of Work

If we talk about mining, you may first think of a coal or gold mine with workers breaking rocks to get minerals, and yes, you are right, but today we are not here to talk about that mining. Today we will talk about cryptocurrency mining.

Surely you are wondering why it is known as mining. Like gold mining, where you take a pickaxe to extract value from the land, you use powerful computers with cryptocurrencies to remove value from the network.

Cryptocurrency mining is the process in which users validate transactions to be stored on the blockchain. This process generates new coins that are delivered to users through rewards.

Why is cryptocurrency mining essential?

Mining goes far beyond validating transactions and storing them on the blockchain for a reward. The process is crucial for securing cryptocurrencies because the miners only record valid transactions and prevent users from spending the same cryptocurrencies twice.

If what we mentioned before doesn't seem important enough, this will be important enough because, thanks to the miners, the Bitcoin blockchain is invulnerable because a hacker would need to accumulate 51% of the computational power to edit or revert a payment in the network. This is impossible in the essential blockchains since the number of miners is so large that there is simply no way to breach many devices.

How does mining work? 

You must know the block identifier to mine a new block and obtain the juicy reward. That identifier is achieved by solving highly complex mathematical operations, so much so that it would take a person years to solve one independently. 

Waiting for a person to resolve an operation is not an option, especially when the reward goes to the first miner who gets the ID Block. That is why powerful computers capable of processing hundreds of daily operations are used. The more power you manage to gather, the greater the chances of obtaining the reward.

So that you better understand how mining works, we will explain it to you with an analogy. Imagine that there is an ATM, and the person who inserts the correct key will take all the money inside. The miners try different combinations until one obtains the right key and obtains the reward. It sounds effortless, but the key to identifying a new block has 64 digits, and millions of computers work day and night to obtain the correct combination.

Energy consumption in cryptocurrency mining

The power required to mine a bitcoin block generates enormous energy consumption. Still, we must take this with a grain of salt because there are specific nuances since energy consumption is not synonymous with pollution. The pollution generated by cryptocurrency mining is challenging to calculate because people are mining from thousands of places worldwide, and it is necessary to know the origin of that energy.

For several years, we have heard the comparison that mining bitcoins generates an annual energy consumption more significant than that of entire countries. While this is true, it is a comparison that lacks context. The reason:

Mining cryptocurrencies annually consumes about 183 million GJ, costing $4.5 billion. But, if we compare it with the annual consumption of the traditional banking system, the mining numbers are nothing since approximately 1,870 million GJ are consumed or a yearly cost of $2,340 billion. This leaves us that mining bitcoin needs less than 10% of the energy consumption required by the banking system.

Point of view and opinion plays a key role because if you believe Bitcoin is a scam and useless, you will think it is a waste of energy. On the other hand, if you protect your money from inflation thanks to cryptocurrencies, energy expenditure will seem like a wonder to you.

Energy consumption is a problem; the pollution generated is a fact, and long-term solutions must be sought for these problems. Some cryptocurrencies, such as Ethereum, saw the answer in replacing mining with Proof of Stake (PoS). In this way, energy consumption is reduced by almost 99%. 

Do you think this is a viable solution for Bitcoin? Join our community on Telegram and share your opinion with hundreds of users.

If after reading this article, you wanted to have a few bitcoins, but you don't want to compete against millions of computers. You can easily buy BTC and pay with your local currency in El Dorado, just click here and follow the way to financial freedom.

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