From the first two articles written by Pranav Joshi, we understood the Overview of Cryptocurrency, Analysis of Blockchain and its fundamentals. But when Cryptocurrency mining comes into existence it all becomes complicated. Cryptocurrency Mining occurs at this point in time. Cryptocurrency Mining is the process that currencies are minted and introduced into the market. The article is divided into two parts Beginners guide on Cryptocurrency Mining and Understanding of Mining process. Hence, Let us understand Cryptocurrency Mining in detail.
Computer hardware plays a vital role in the mining process. The price of Computer hardware boosted in the last four years. As the price increases tremendously, the hardware becomes out of stack easily.
Understanding Graphics Processing Unit
Graphics Processing Unit means an electronic circuit that enables the graphics for display and the different electronic devices. In 1999 the GPU came into existence in the market. GPU acts as an interchangeable device with the graphics card.
Since there was a notable rise in the graphic card prices. The prices rose to a tremendous level from 36,000-40,000 to 1,00,000. But people are unable to buy due to the shortfall in supply. A question arises in everyone’s mind Why did the many graphic card prices rise tremendously in a short span and who were the buyers of the same? The answer to these questions is Cryptocurrency Miners
Why do Cryptocurrency Miners continuously buy graphics cards?
Cryptocurrency Miners are used to validating cryptocurrency transactions. Bitcoin takes the help of a public ledger to report who confirmed cryptocurrency transactions. Therefore, to know how Cryptocurrency Miners validate the transactions we need to know how cryptocurrency working takes place.
How does the working of Cryptocurrency take place?
In cryptocurrency, the nodes engage in the blockchain network. It implements a copy of the entire blockchain to the network. All the miners come together and form a node. Nodes are that part where it comes together through the help of the internet. Hence, a huge network is created.
Every node maintains the blockchain ledger. It is maintained to keep the record of cryptocurrency transactions. All the cryptocurrency transactions are saved in the blockchain ledger.
Additionally, when the cryptocurrency transactions are created, it starts sharing with the node that is nearest. Then this node shares the details of the transaction with the connected peer node. Once the transaction reached the mining node the transaction details are decoded. It collects all the information and keeps it in the block.
As and when the block gets published accordingly the updation of the node takes place. The transaction gets confirmed. Therefore, it is a very simple and unique way to understand how cryptocurrency works.
Different types of Cryptocurrency Mining Nodes:
Node is defined as software that connects each other. The connected nodes are called “Peers”. So, it’s a peer-to-peer network. There are different types of Nodes:
Full Node: –
In the detailed blockchain, information is stored by the full node. New blocks were created and updated themselves. Full nodes stores full blockchain information. Hence, it updated itself with new blocks. Full node validated the transaction and blockchain.
Super Node: –
The side-chaining is initiated when the super node is created. It acts as spreading information in the network. Effective improvement in the system is seen because of this node. Therefore, Supernodes are connected to the full nodes.
Light Node: –
Light nodes are the downloaded wallets. A full node is connected to it. As the name suggests it’s a light version of the blockchain.
Mining Node: –
Though, another name for mining nodes is “Miners”. These nodes help to solve cryptographic puzzles in a process referred to as Mining. The main aim of the miners is to be the first node. It wants to create a new block in the blockchain. Using cryptography algorithm mining node decodes transaction.
There are two types of mining techniques Proof of stake and proof of work. The specific miners do Proof of Stake as they are the owners of cryptocurrency. Proof of Stake as the name suggests tells you how much stake does a miner is having in cryptocurrency. Hence, on that basis, the miners can mine.
Proof of work is a decentralized mechanism that represents members of the network to expand effort solving. An arbitral mathematical puzzle is proof of work. In cryptocurrency mining proof of work is used vastly. Anyone can connect their computing hardware with one of the nodes and will start mining. Therefore, we will understand the Mining Process in the upcoming article.
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