Mining Cryptocurrency | What is it?

You've more than likely heard of mining cryptocurrency and have probably thought to yourself "How do you mine something you can't see?", well, in this article I will cover what it is and how you can do it.

Simply put, mining is how transactions on the blockchain of the given cryptocurrency are verified. People who use their computer hardware to mine (Miners) are paid in that currency for their work. The beauty of this is that transactions are dealt with on a peer-to-peer basis and no centralised authority is ever involved. Collectively, they act as a decentralised network which is almost immune to outside attacks.

It's safe to say that the average user will not be mining Bitcoin, unless, in the unlikely situation they happen to be owners of a huge mining operation, featuring thousands of ASIC miners. This is because so many people are mining them and putting your small, $500 rig to work on a Bitcoin mining pool is not likely to bear any fruit, it's a huge lottery, where your little rig has the smallest chance, then cut that chance into further smaller pieces, of getting a share.

Mining also adds new coins from the total supply into the circulating supply and once the total supply is put into circulation, this may cause miners to stop mining, but it may also cause people to continue, to claim the rewards attached to it. As an example, Bitcoin has a total supply of 21 million and the last coin is set to be mined in 2140 so the price, if cryptocurrency is still a "thing", could potentially be very, very substantial.

At the start, when Bitcoin was first released into the wild, the block reward was set at 50 Bitcoin. So every miner would get a portion of that when the block was successfully mined, which occurs every 10 minutes. Every 4 years the block reward is halved. As of 2020, the block reward is currently set at 6.25 Bitcoin so, as you can imagine, it is a very competitive industry.

Depending on what you chose to mine, you may or may not make money. There are some projects out there that are just starting up, and they require people to aim their hardware towards it.

Make sure you do your own research, though. Mining costs money, and things like electricity charges should be factored into it when are researching what you are mining. A lot of it is speculatory, and in some cases, you may or may not lose money.