Steemit Crypto Academy | Homework Task 4 For @besticofinder| introduction to cryptocurrency mining|

Hello Steemians, I’m glad to join the steemit crypto academy week 4 lesson. My knowledge of cryptocurrency is appreciating since I started taking these lessons and performing the homework task.
Today's lesson was giving by professor @besticofinder |Introduction to Cryptocurrency Mining|.

The task associated with this post is to discuss how cryptocurrency mining works, the difficulty encountered in mining and the challenges faced by cryptocurrency miners.

Cryptocurrency Mining and how it works

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In traditional means of banking, transactions go through a central body where they are controlled, verified and updated. But the advent of cryptocurrency has eliminated this central body with its decentralized system which uses distributed ledger known as blockchain. In blockchain technology, transactions are publicly available and stored in different computers. In blockchain technology, transactions are to be verified just like the traditional banking system and added to the ledger, this is done by solving cryptography algorithms by miners 2.

Solving these algorithms is a complex task for each transaction initiated in the blockchain, computers are being used for the cryptographic calculation and miners are rewarded in cryptocurrencies. The image below explains the steps involved in cryptocurrency mining.

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The difficulties associated with mining cryptocurrency

From the explanations above, it sounds very simple to be a miner and you might want to take advantage of that to earn cryptocurrencies. But mining cryptocurrencies is not for everyone as this comes with a high running cost. Nowadays, mining requires a lot of resources in terms of processing power and high electricity cost. Similarly, the rise in cryptocurrency has produced so many miners and nowadays, it takes little time to mine cryptocurrencies. To be able to compete with other miners requires high tech processors and special machines making mining difficult.

Challenges faced by cryptocurrency miners

Mining cryptocurrencies can be profitable. There are challenges faced by miners and these includes:

High energy cost

Cryptocurrency is associated with high energy demand. The reason is that high factory computers are running 24/7. This can lead to restrictions on mining cryptocurrency in some geographical areas.

Low ROI

There are a lot of companies and individuals joining cryptocurrency mining this present day, which means that the reward associated with solving a block will be reduced and the return of an investment will be decreased.

Thank you @besticofinder for this lesson.

Cc: @steemcurator01
Cc: @steemcurator02