Crypto-Currency ~ Mining
Crypto-Currency is the wave of the future as more and more businesses start taking this currency. There are many types of coins being mined today. Not all are the same. Some have backing others don’t.
At the recent event in the City of London, it was said that 2014 will be the year for bitcoin mining, as the crypto-currency is soon to reach a tipping point where creating it will no longer be possible for the average user.
Mining is the term given to the process of producing virtual currencies like bitcoin and litecoin, where computers solve mathematical equations and are rewarded with coins for their efforts.
When bitcoin launched five years ago coins could be easily mined using a home computer or laptop, but the currency is pre-programmed to make mining more difficult over time, resulting in a situation now where only specially-made computers can mine efficiently.
When bitcoin was launched in 2009, any regular computer could be used to mine it. The process of solving mathematical equations was performed by the computers’ CPU (central processing unit), but as the difficulty increased, mining through the CPU became impossible and instead users recruited the extra power of their GPU (graphical processing unit).
For most users of crypto-currencies it is not necessary to understand how the mining process in itself works, but it is fundamentally important to understand that there is a mining process to create the virtual currency. Unlike currencies as we know them today where governments and banks can simply choose to print unlimited amounts (Not saying they do so, just a point), crypto-currencies has to be mined by users using a mining program that solves sophisticated algorithms in order to release blocks of coins that can go into circulation.
This is part that makes the crypto-currencies unique, as there is nobody who can simply press a button and get unlimited coins. Everybody can compete equally while mining coins, by buying the same equipment as one another. The different crypto-currencies uses different types of algorithms in order for the blocks to be released, but in general it is not something that you should be using your computer to do as it takes specific equipment to mine and it will provide you with a huge electricity bill compared to the profits you will be able to make from it. It is also worth noting that the more coins that has been mined from a crypto-currency, the more difficult it gets to release new blocks and thus get new coins. The algorithms has been made this way, to ensure that all the coins would not be mined instantly and leave room for the currency to stabilize and not be over populated from the beginning, thus not having any significant value for anyone besides the miners.
Crypto-currencies have a limited amount of coins that can be mined and once they have all been mined, there will be no more of them being created as it is virtually impossible. This means that when all 21 million Bitcoins has been mined, they will be the only coins in circulation forever and no further Bitcoins will be added to the system. Same goes for all other crypto-currencies, which is why many people see them as a good alternative to the currencies we have today that is based on nothing but goodwill between countries in order to ensure the value of the currency doesn’t fluctuate.
There are two simple steps in the mining process for crypto-currencies, which we will be describing below as user-friendly as possible. Please bear in mind that we do need to use some technical terms in order to correctly describe how it works.
Crypto-currency Mining Program
The very first thing you need in order to start mining coins is to obtain the mining program that is associated with the crypto-currency that you want to mine. For the larger coins you can find different mining programs that all share the same mining pool, while the smaller coins usually just have one mining client, which also works as the wallet of the coin. Simply download the mining program, install it and you are ready for the next step.
When you first download the mining program it will have to connect to the network and synchronize with it. This can take everything from a few minutes and up to several hours, depending on how many blocks you need to solve first before you can synchronize. Once the synchronization is done then you are basically ready to mine.
All you need to do from here is to go to the mining part of the wallet, enter the values you want to have and press the “start mining” button. The system will then begin to “mine” for coins and depending on your system you will see some results within a couple of days.
Each crypto-currency has made a decision regarding which algorithm they wish to use to mine their coins, before they are created. There are two different algorithms that are used for almost all the coins that is in existence today, which is the SHA-256 and Scrypt algorithms. They are both very difficult to mine with, becoming increasingly difficult the more coins that has been mined. We have gathered a small explanation of how the algorithms work exactly, so you can understand mining a little better:
The SHA-256 algorithm is the first algorithm that was used with a crypto-currency, when the Bitcoin was created using it. SHA-2 which the SHA-256 is under is created by the National Security Agency (NSA) and was published in 2001. SHA stands for Secure Hash Algorithm, which makes fine sense for crypto-currencies as you will need to solve the hash algorithms in order to release coins. The more coins that will be mined, the harder the hash algorithms will become as it is originally used as a security system tool for companies and governments.
The Scrypt algorithm that crypto-currencies use is a “proof-of-work” algorithm, which is basically using the same idea behind the Scrypt algorithm, but is targeted against releasing blocks rather than block an attack. Scrypt is a key derivation function which was created by Colin Percival, created to require large amounts of memory on a computer performing large scale custom hardware attacks. It was released in 2012 and was quickly used by crypto-currencies for mining coins as another way than the SHA-256 algorithm that Bitcoin used. Scrypt is seen as a better algorithm for miners as you can buy equipment that will significantly improve your performance compared the SHA-256 where you cannot buy equipment to make ideal mining.
Interesting, Right? Mining can now be done on the cloud with GCR.
Learn more about the future. @ https://www.youtube.com/watch?v=67zh40TErmI
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