Homework Task 4

You need to do your own research and create an article discussing following topics,
(1) How crypto currency mining works ?
(2) What is Mining Difficulty ?
(3) What are the challenges for crypto currency miners ?

---

_{Source: Bitcoinchaser}

What is Cryptocurrency Mining and How it Works?

"Cryptocurrency mining" is the process where transactions between users of the cryptocurrency are verified & are added to the blockchain's public ledger. Introducing newer coins/crypto units into the existing supply is also the result of the mining process - this is one of the key elements that is allowing cryptocurrency platforms to be able to work as p2p or peer-to-peer network that is decentralized, with no need for a central authority managing it.

Miners are the nodes in the crypto network that is collecting transactions and are organizing them into blocks. The instance a transaction is executed, all those network nodes will receive them and will verify the transaction's validity. After that the miners then collect all those transactions from the pool and assembles them into blocks. It's like packing them together in 1 folder.

Individually hashing each transaction that was taken from the pool is the first step of mining a crypto block. Before this process starts though, a miner node will add a transaction where they will send themselves the reward for mining. They call this specific transaction the coinbase transaction, this is the transaction where a certain coin is made and will be the first transaction that will be recorded in a new block.

_{Source: Pixabay}

What is Mining Difficulty ?

Mining difficulty in cryptocurrency is the relative measure of the resources amounts needed to mine new bitcoins. This will climb or fall at the end of around what they call a 2-week epoch (2,016 blocks) which will depend on the hash power that was consumed by the network overall, if that has decreased or increased.

We can say that the difficulty is related to the price. For example, when Bitcoin's price increases, the power needed to mine new ones will decreased.

_{Source: Taxbit}

The challenges for crypto currency miners ?

As with all kinds of things connected to cryptocurrencies there are hindrances from getting profits, with trading, etc - there are risk. Will discuss here some challenges miners of cryptocurrencies face.

1. High Energy Costs

Maximizing the chances of mining cryptocurrencies successfully will require you to combine as much as hundreds of mining equipments called ASICs, just to solve one problem. This would mean higher power outputs, which will definitely cost high in electricty charges. It was reported that BTC consumes energy as high as or even more than 150 countries.

1. Cryptojacking Vulnerability

Decentralization is aiming to assure security of your assets. However, the hackers are getting smarter in doing their things as well. There was a report years ago that browser cryptojacking grew as much as 31 percent. There are even ways to mine cryptocurrencies using other people's computers without them knowing.

1. Centralization

Cryptocurrencies' #1 priority in my opinion is decentralization. However there are challenges that miners are facing, due to ASICs, the equipment they need to mine cryptocurrencies. There are only a few manufacturers who produce them and sometimes this affect decisions a lot - and there's a fear of the space being too centralized because of it.

Thanks a lot for reading!

---

_{Images with no source were made by me. Thanks @besticofinder, @steemitblog, @steemcurator01, @steemcurator02.}