How to mine cryptocurrencies?

how are they mined

Cryptocurrency mining is the process of solving a mathematical problem (for example a sum) using computer equipment.

When a computer (or a group of these) adequately solves the problem posed by the network, it is rewarded with an incentive, in the case of cryptographic money the incentive is a series of units of the cryptocurrency that is being mined.

Basically, what these computers do is launch a series of possible solutions, until the proposed solution matches the hash value of the block.

Mining cryptocurrencies, the simplest explanation:
Let's say, for example, that the hash puzzle states that whoever first discovers the number from 0 to 10 wins the prize. The miners will be throwing numbers, until the number matches the puzzle.

During the process you will be wondering if the number is correct or not.

Whoever reaches the correct number before, wins the prize or what is the same, takes the reward of the block.

The algorithms that determine the difficulty of the problem and other variables today are taken as consensus systems. This is because the agreement of the rules is needed by all participants.

The PoS is based on storing coins and the work is simpler, which allows not wasting work as in the PoW and is more efficient at the energy level.

Different types of computer equipment can be used for Proof-of-Work mining.

2. What is mining difficulty?

How does the mining difficulty work?

Before explaining how the mining difficulty works, you must first be aware of some very basic facts. First of all, the fundamental objectives of mining are:

1. Generate a new block to include the transactions that originate in the network by the mining users. This process is what allows us to send and receive coins safely
2. Enable the generation of new coins through the block reward.
3. Create a mechanism that ensures that the history of the blockchain cannot be easily modified.

In fact, in mining the time taken is vital and is taken with a great level of detail thanks to the timestamps or mining timestamps.

Role of mining difficulty within the mining process?

At this point, the goal of mining difficulty in mining is simple: control the nonce and target values that are enabled for the network and the miners that are part of it. That is, the value of the mining difficulty depends on the values of the nonce and the target of the block hash that must be mined. This close relationship is marked in Bitcoin by this process:

1. First of all, the mining protocol stipulates that every 10 minutes on average a new block must be generated. This is important because if the production of blocks is very fast, the issuance of new currencies will begin to grow and with it the mining will tend to inflation, an event that can lead to problems both at the network level (breaking the balance of the Test of Work) or economic (with higher inflation and supply of bitcoins, the price of the same will tend to fall

2. When the mining process begins, the network generates a mining difficulty value. To generate this value, the network must first know the height or the number of blocks that already exist. Second, it must be established every few blocks or time that value must be adjusted and reviewed
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Example of mining difficulty

The above is roughly the algorithmic process that occurs within mining. But how can we easily see the concept of mining difficulty? The answer is in the lottery. Let's imagine for a moment the following:

1. We are participating in a lottery where there are 100 billion participants. The large basket of numbered marbles has the same number of marbles with a hash noted on each of them. Lottery tickets have these hashes and the only way to win is to have a ticket with a number immediately less than the lottery's search target.

2. If luck is not on our side, we will have to draw many of these numbered balls to win. That is, the lower the target, the greater the difficulty and the more time we will have to spend taking numbered balls until we find the winner.

How is it calculated?

The above has surely amazed us and has led us to ask ourselves: How is the mining difficulty calculated? Well, this value can be obtained with the following formulation:

difficulty = difficulty_1_target / current_target
In this case, the data means the following:

1. current_target refers to a 256-bit number that is the current target of the network.
2. Difficulty_1_target, is a value that is given by a hash where the initial 32 bits are zero and the rest is one.

Why does the mining difficulty change?

mining stipulates very clearly that each block must be done every 10 minutes. This tells us that miners must be presented with a puzzle that takes them 10 minutes to solve. However, the computing power of computers evolves.

In fact, mining evolved further, into computers to move to GPUs (graphics cards), reaching FPGAs and now ASICs. The latter are very powerful hardware that can do mining calculations very quickly and efficiently. This increased power in the hands of miners means that they can now solve puzzles more quickly.

Current mining difficulty?

The current mining difficulty can be obtained from several sites, but in this link you can see it very quickly and easily.

What is the maximum and minimum difficulty in mining?

The maximum difficulty is practically infinite. This is due to the fact that there is no objective or minimum target. Thus this value is given by the equation:

difficulty = difficulty_1_target / current_target

Where current_target = 1. However, the actual maximum difficulty is when current_target = 0, but this will never happen.

On the other hand, the minimum difficulty, is when the objective or target is at the maximum allowed value, it is 1.

3. What are the challenges for cryptocurrency miners?

Vitalik Buterin, in a white paper that created Ethereum, a cryptocurrency intended to overcome the rigidity of Bitcoin, pointed out that cryptocurrencies could not have scalability at the same time, that is, the possibility of adjusting the money supply quickly to maintain stable prices and to function. as a means of exchange; decentralization, and security.

According to Buterin, you would always have to give up one of these characteristics in the design of a cryptocurrency to obtain the other two. 42 his theorem is solid when contrasted with the historical evidence we have for coins. Central banks offer scalability and security, but they are centralized and control the supply of currency. The decentralized systems of the existing currencies could have more flexibility and scalability, but at the cost of the security in the network that must be validating the transactions.

Its protocols, called “proof of interest (proof-of-stake), give more weight in the consensus required to validate transactions to the user who has more interest in the destination of the currency, which implies a certain degree of centralization.

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