Introduction to cryptocurrency
Today on Ayomikun Abraham’s blog we shall be looking at cryptocurrency and Cryptocurrency minning.
What is a cryptocurrency.?
A cryptocurrency currency is also known as e-currency or virtual currency. They are known as these as they are not physical money ie they only exists on the Internet.
Example of commonly used cryptocurrency are bitcoin, etherium, Dodge coin and tron.
You might be wondering how cryptocurrencies are continually updated. If it were normal physical money it will be updated (that is printed) in a place called a mint. But cryptocurrencies are updated in a process known as cryptocurrency minning.
Cryptocurrency mining involves lots of expensive and energy consuming machines. This article will lead you on how to go about it.
The way in our countries we have central banks, In cryptocurrency we have what is known as the block chain ledger. Cryptocurrency mining involves adding these cryptocurrencies inform of trades between users. This process makes sure cypto is decentralized and peer to peer
Bitcoin is one of commonly used cryptocurrency that is mined today it is important to note that you can’t mine all the kinds of cryptocurrency. The mining of bitcoin works on a generally agreed upon algorithm known as proof of work.
How does cryptocurrency minning work
The work of a miner is to collect trades/transactions and arranges them into blocks. Whenever a trade is completed the miners collect them and check them to ensure that they are valid. It is after this validation exercise that they are arranged into blocks. It is important to note that trades are gotten from the memory pool.
Mining begins when , trades are hashed one by one (the trades are gotten from the memory pool). But before hashing a trade is added. This trades are known as the coinbase transactions. And it is the trade that is first registered in the new blocks.
After the hashing process, the hashes are arranged into trees called hash trees when hash pairs are really hashed again. These rehashing process goes on until the top of the tree is reached. These top which is known as the root hash represents all the previous hashes.
The root hash – along with the hash of the previous block and a random number called nonce – is then placed into the block’s header. The block header is then hashed producing an output based on those elements (root hash, previous block’s hash, and nonce) plus a few other parameters. The resulting output is the block hash and will serve as the identifier of the newly generated block (candidate block).
In order for the block hash to be validated , it must be less than a value(this value is also known as the hashing difficulty and is controlled by the protocol) which is determined by protocol. The output usually starts with a certain number of zeros.
The value (target value) remains constant and proportional to the amount of hashing power devoted to the network.
When new miners join the system, there is an increase in competition which will inturn raise the hashing difficulty , stopping the average block time from lowering.
When miners leave the difficulty in hashing will be significantly reduced, making sure the block time is constant with less power.
The mining process needs miners to keep on hashing repeatedly, by iterating the nonce until a mineral in the system eventually produces a valid block hash.
When the valid block hash is produced, the founding node will send an information about the block to the system. Other miners will check and see if the block is valid. If it is valid they will add it to their block chain and look for the next mining block.
If it happens that two miners send information about a valid block simultaneously and the system ends up with two competing blocks, the miners will add the one they received first.
The competition between these blocks will continue until the next block is mined based on either one of the competing blocks. The block that gets abandoned is called an orphan block or a stale block. The miners of this block will switch back to mining the chain of the winner block.
The block reward is given to the miner who finds the valid hash first, the chances of discovering the hash is equal to the portion of the total mining power on the system . Miners with a very little percentage of the mining power stand a very small probability of finding the next block on their own. Mining pools are created to solve this issue . It means pooling of resources by miners, who split their processing power over a system , to share the reward equally among everyone in the pool, according to the amount of work they contribute to the chance of finding a block.