Crypto Academy Week 4 Homework Post for @besticofinder|| Cryptocurrency Mining|| 3rd March 2021.

Hello everyone, the new week is starting so great and i want to appreciate @besticofinder for taking his time to give a well-detailed lecture this week. On this post, i will be explaining all i know about how cryptocurrency mining works, mining difficulties and challenges faced by cryptocurrency miners.

Source

INTRODUCTION.

First of all, Cryptocurrency Mining is a process in which a machine performs certain tasks to obtain a little bit of cryptocurrency. That is, Mining in the crypto world is the process of keeping blockchain data in check. It involves hard work (done by computers) and results in a slow accumulation of resources – just like mining for minerals. Although crypto mining has only been around since Bitcoin was first mined in 2009, it’s made quite a splash with miners, investors and cybercriminals alike. It’s important to understand that the cryptocurrency market itself is an alternative to the traditional banking system that we use globally.

(1) How crypto currency mining works ?

To understand how most cryptocurrency mining works in a more technical sense, you need to first understand the technologies and processes behind it and that includes understanding what blockchain is and how it works. There are two main things centred to the concept of blockchain and they are Public Key Encryption and Maths. I am actually not a fan of the first, but i have a strong suit when it comes to the second. However, public key cryptography and maths goes together in blockchains. Volatile or not, cryptocurrencies are part of the global financial landscape and like anything promising fast returns, they’ve given cybercriminals new opportunities. Cryptocurrencies like Bitcoin and Monero are decentralized, peer-to-peer digital cash systems that use cryptography to secure units, verify transactions and control production of new currency. As there’s no central authority, it’s up to users to record and confirm transactions. This is done using a blockchain, a public ledger of every transaction for a given cryptocurrency. Each transaction requires the sender’s and recipient’s public wallet addresses, the amount of currency transferred, and the sender’s approval using their private key. This distributed payment model is designed to prevent fraud and double spending. Transactions must be confirmed before they can be added to the blockchain, and only cryptocurrency miners can do this. Each time a transaction is made, a cryptominer must ensure its authenticity and update the blockchain. To keep fraud out of the blockchain, miners must solve difficult computational problems to confirm transactions. The miner responsible for a confirmation is awarded a small amount of cryptocurrency. To stay competitive, miners require enormous processing power. As a result, enterprises are now targets for illicit cryptomining as cybercriminals find ways to hijack private and company-owned CPU resources, including powerful corporate data centers.

(2) What is Mining Difficulty ?

Mining difficulty is one of the most important aspects when it comes to cryptocurrency mining. Some cryptocurrencies are harder to mine than others. Mining difficulty is a measure that calculates the difficulty of a mathematical equation. These equations are necessary for miners to obtain a hash.

Sourse
There are several factors that affect mining difficulty:

• For some cryptocurrencies, there is a global block difficulty that the system sets by default. Blocks need to have hash power that is lower than the target set by the system.
• It is possible for a mining pool to use what is known as a “shared difficulty” setting for mining a specific cryptocurrency. Smaller share difficulty provides more accurate stats and payouts in the short-term and bigger share difficulty, while also showing accurate results, does so in the longer-term.
• Mining difficulty depends on how many people are actively mining on the cryptocurrency network at any given time.

(3) What are the challenges for crypto currency miners?

Cryptocurrency mining can be a cost-effective business; however, it is essential to recognize the main challenges cryptocurrency miners face & how they can be conquered.

Three main challenges of Crypto-mining

High Energy Costs

To achieve a successful mining, you need to chain a lot of ASICs to resolve one problem. Therefore, this would involve a very high power yield, which will cost you exceedingly high electronic fees but this challenge can be solved by:

• Cryptocurrency miners can choose less power-demanding practices like Proof of Stake (PoS) which is one of the practices that secures the systems through the gambling of cryptocurrency.
• Running your activities for cryptocurrency mining on mining services and mining records centres that are driven through renewable hydroelectricity as well as solar energy.

Liability to Cryptojacking

Beyond generating a democratic space, the spirit of decentralization is to guarantee security? Hackers are more refined at beating your incomes. In the meantime, the concentration of power is not only liable to malware spasms, but cyber thieves are now implementing a ransomware-like approach to mine cryptocurrencies from computers.

• There is actually no conservative solution to this problem; but the development of PoS implemented via DigiByte, which consumes a mixture of five procedures on the platform of its blockchain is a reliable source that cryptocurrency miners can utilize to help protect against this type of attack.

Centralization

Another huge challenge for cryptocurrency mining is ASICs which has established adept in mning cryptocurrency. They are mighty that it becomes a challenge whenever a coin-specific ASIC is introduced. Though this is seen as a huge development in the cryptocurrency world but it is observed as a problem making many cryptocurrency miners to manipulate the method at which ASICs are designed. And then, since there are few ASIC constructors, the mining space is been centralized. However, there are two ways to solve this issue:

• Decentralizing the technical procedure of ASIC miners,
• Putting into the outcome that can efficiently wipe out all current ASIC miners, which is a new hash algorithm.

Special Thanks to:
@besticofinder
@steemcurator01
@steemcurator02