Cryptocurrencies have been around since the introduction of Bitcoin in 2009. But people still struggle to understand all the concepts associated with digital currencies. This article takes crypto mining under a microscope to better explain the most popular terms related to this process.
Mining is one of the foundation stones of cryptocurrencies. It is also one of the first terms discovered by the beginners when they start exploring the crypto space. The whole idea may seem a bit difficult to comprehend at first. Especially with other terms associated with it, like hash rate, hash power, nodes and miners. So, let’s start from the beginning!
The meaning of mining in the world of crypto
Mining is a process where transactions are collected in blocks, validated and added to the blockchain ledger. It is carried out by special computing devices called miners. These machines use computing power, also known as hashing power, to solve complicated cryptographic puzzles. Once they are done, the completed block is distributed among other network participants, known as nodes, to verify if it is correct. Then the block is added to the blockchain.
Apart from verifying and adding new transactions to the blockchain, the mining process ensures that the network is secure. It also adds new coins into the circulation in the form of rewards for the effort and resources miners put into work.
Now that we know how crypto mining works, let’s take a closer look at some phrases that appeared in the definition above.
Miners, the machines used for mining
A miner is special device used in the crypto mining process. It is also known as a mining rig or a mining machine. Miners use their computing power to solve complicated cryptographic puzzles and create a block as a result.
In the early stages of the development of cryptocurrencies, anyone could use a regular CPU of a personal computer to mine. But when the demand increased and the whole process got more complicated, special mining machines were introduced. The most popular ones are:
- GPU miners (hardware equipment using graphics processing unit),
- ASIC miners (application-specific integrated circuit) designed for the sole purpose of mining cryptocurrencies.
Sometimes the term miner is also used to describe a person who owns and uses the mining machine.
Hash power and hash rate explained
There are two important parameters that relate to the mining machines. They are used to describe how much computational power these devices have.
It refers to the computing power of a miner involved in solving cryptographic puzzles. The higher the hash power of the device, the bigger the chance of solving the puzzle and creating a block.
Hash power of a miner depends on its type. Right now, ASIC miners have the highest hash power, so they are the most effective and efficient when it comes to mining.
Sometimes the term hash rate is used interchangeably with hash power in relation to the capacity of the mining equipment. However, there is also a separate definition of hash rate.
A measurement unit of the computing power of the blockchain network. It is the combined hash power of all connected miners. Hash rate is measured in hashes per second (h/s).
Hash rate is the indicator of how healthy the network is. The more miners are connected, the higher the hash power and the more secure the network.
The last word to explain when it comes to mining is a node, whichis a computer connected to the blockchain network. It validates the blocks and transactions against the protocol’s consensus rules. Depending on the node type, it stores the full or reduced version of the blockchain ledger.
Mining cryptocurrencies is a complex process, but hopefully it is a bit easier to understand now. If you would like to learn more about digital currencies, make sure to watch out for the next article. We will explain what a block is and what it holds within. In the meantime, do not hesitate to check out other interesting topics on the MineBest blog!