{"id":380074,"date":"2021-12-12T16:00:10","date_gmt":"2021-12-12T13:00:10","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/what-is-crypto-mining-and-how-does-it-work\/"},"modified":"2021-12-12T16:00:10","modified_gmt":"2021-12-12T13:00:10","slug":"what-is-crypto-mining-and-how-does-it-work","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/what-is-crypto-mining-and-how-does-it-work\/","title":{"rendered":"#What Is Crypto Mining, and How Does It Work?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2e2cc5dfa0b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2e2cc5dfa0b\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-crypto-mining-and-how-does-it-work\/#What_Is_Crypto_Mining\" >What Is Crypto Mining?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-crypto-mining-and-how-does-it-work\/#The_Blockchain\" >The Blockchain<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-crypto-mining-and-how-does-it-work\/#The_Ledger\" >The Ledger<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-crypto-mining-and-how-does-it-work\/#How_Crypto_Mining_Works\" >How Crypto Mining Works<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-crypto-mining-and-how-does-it-work\/#DIY_Supercomputers\" >DIY Supercomputers<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-crypto-mining-and-how-does-it-work\/#Mined_vs_Non-Mined_Cryptocurrencies\" >Mined vs. Non-Mined Cryptocurrencies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-crypto-mining-and-how-does-it-work\/#The_Future_of_Mining\" >The Future of Mining<\/a><\/li><\/ul><\/nav><\/div>\n<p><strong>&#8220;#What Is Crypto Mining, and How Does It Work?&#8221;<\/strong><\/p>\n<div>\n<figure style=\"width: 1200px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\"type:primaryImage wp-image-772091 size-full\" data-pagespeed-lazy-srcset=\"https:\/\/www.howtogeek.com\/wp-content\/uploads\/2021\/11\/shutterstock_753650251.jpg?width=398&amp;trim=1,1&amp;bg-color=000&amp;pad=1,1 400w, https:\/\/www.howtogeek.com\/wp-content\/uploads\/2021\/11\/shutterstock_753650251.jpg?width=1198&amp;trim=1,1&amp;bg-color=000&amp;pad=1,1 1200w\" sizes=\"auto, 400w, 1200w\" data-pagespeed-lazy-src=\"https:\/\/www.howtogeek.com\/wp-content\/uploads\/2021\/11\/shutterstock_753650251.jpg?width=1198&amp;trim=1,1&amp;bg-color=000&amp;pad=1,1\" alt=\"Cryptocurrency mining equipment.\" width=\"1200\" height=\"675\" data-crediturl=\"https:\/\/www.shutterstock.com\/image-photo\/cryptocurrency-equipment-mining-money-electronic-finance-753650251\" data-credittext=\"Mark Agnor\/Shutterstock.com\" src=\"\/pagespeed_static\/1.JiBnMqyl6S.gif\" onload=\"pagespeed.lazyLoadImages.loadIfVisibleAndMaybeBeacon(this);\" onerror=\"this.onerror=null;pagespeed.lazyLoadImages.loadIfVisibleAndMaybeBeacon(this);\"\/><figcaption class=\"wp-caption-text\"><span class=\"type:primaryImage imagecredit\"><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.shutterstock.com\/image-photo\/cryptocurrency-equipment-mining-money-electronic-finance-753650251\">Mark Agnor\/Shutterstock.com<\/a><\/span><\/figcaption><\/figure>\n<p>With the cryptocurrency craze in full swing, you can\u2019t avoid hearing about the people mining these digital currencies\u2014and destabilizing the graphics processor market. Here\u2019s what \u201ccrypto mining\u201d actually is.<\/p>\n<h2 role=\"heading\" aria-level=\"2\"><span class=\"ez-toc-section\" id=\"What_Is_Crypto_Mining\"><\/span>What Is Crypto Mining?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In short, crypto mining is how new units of cryptocurrency\u2014usually called coins\u2014are created. As you can imagine, this type of mining doesn\u2019t involve callused hands gripping pickaxe handles. Instead, it\u2019s computer processors that do all the hard work, chipping away at complex math problems.<\/p>\n<p>Of course, you may wonder why these digital currencies even need to be mined: after all, it\u2019s make-believe money with no backing except what people will pay for it. Real currency, the kind backed up by governments, can be created by turning on a money printer, so it stands to reason that crypto could do the same.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_Blockchain\"><\/span>The Blockchain<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The fact that supply couldn\u2019t be restricted was the main hurdle for cryptocurrency for years: there were many ideas on how to create digital coins, but no way to ensure people wouldn\u2019t simply duplicate them at will. Without an authority like a central bank\u2014an institution that regulates the flow of currency\u2014it becomes very tricky to manage the supply of any currency.<\/p>\n<p>This issue confounded the creators of digital currencies for decades until <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.businessinsider.com\/bitcoin-history-cryptocurrency-satoshi-nakamoto-2017-12#in-2008-the-first-inklings-of-bitcoin-began-to-circulate-the-web-1\">Satoshi Nakamoto<\/a> (most likely a pseudonym) invented something called the blockchain. The full theory of how these work is pretty complicated\u2014we go into more depth in our article on explaining the \u201cblockchain\u201d\u2014but the easiest way to explain it is to picture it as a chain.<\/p>\n<p>In this metaphor, each link is a block, and each block contains a set amount of cryptocurrency. For example, one block <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/coinmarketcap.com\/alexandria\/article\/how-long-does-it-take-to-mine-one-bitcoin\">has 6.25 Bitcoin in it<\/a>. To unlock a new block you need to solve a complicated mathematical equation, which validates the block and adds it to the chain. Also, because the blocks are chained in a linear fashion, you have to go from one to the next, you can\u2019t pick one at random.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_Ledger\"><\/span>The Ledger<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Every time a new coin is unlocked, it\u2019s recorded in the cryptocurrency\u2019s ledger, a massive file anybody can access at any time to see which coins were mined when and by whom. The ledger also shows when a coin changed hands, and who was involved in the transaction, putting the lie to\u00a0the claim that Bitcoin is anonymous.<\/p>\n<p>To summarize, the ledger records the creation and movement of coins in the blockchain. Mining is validating new blocks and gaining access to the coins within. Interestingly enough, since the blockchain has to be finite, it also means that most cryptocurrencies have a hard limit to how many can exist: Bitcoin for example has a <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.investopedia.com\/tech\/what-happens-bitcoin-after-21-million-mined\/\">cap of 21 million<\/a>.<\/p>\n<h2 role=\"heading\" aria-level=\"2\"><span class=\"ez-toc-section\" id=\"How_Crypto_Mining_Works\"><\/span>How Crypto Mining Works<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>To unlock a block in the chain, you need to validate it by solving a complicated equation, usually in the form of something called a hash. A hash is a random set of characters and numbers which, with the right key, reveals the original message; it\u2019s a basic part of cryptography and is where the \u201ccrypto\u201d part of \u201ccryptocurrency\u201d comes from.<\/p>\n<p>In a way, crypto mining is really just solving these incredibly complicated mathematical puzzles. Do it fast enough, and the reward is a coin. If you\u2019re slower than the competition, you don\u2019t get one. This method is called \u201cproof of work.\u201d<\/p>\n<p>However, hashes are, by their very nature, incredibly complicated puzzles to solve. The phone or laptop you\u2019re most likely reading this article on would probably take millions of years to solve one.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"DIY_Supercomputers\"><\/span>DIY Supercomputers<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Of course, if you don\u2019t have a supercomputer, you can always build one. Plenty of people interested in making money from cryptocurrency\u2014Bitcoin in particular\u2014have started doing so, often by connecting several devices to each other to create powerful networks that can combine and amplify the processing power of each individual device.<\/p>\n<p>The most powerful single component you can use in this case is a graphics processing unit, or GPU, the part of your computer that gives you the nice shiny graphics\u2014if you\u2019re on an advanced computer, that is. They\u2019re <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly more efficient and powerful than their cousin the central processing unit (CPU), and putting enough of them together gives you some serious computing oomph.<\/p>\n<p>This brings a new kind of equation into play, one where several savvy individuals calculated that the price of GPUs times the cost of electricity came out a lot less than what one Bitcoin would bring in. This created a kind of arms race where these outfits would create bigger and better rigs to beat their competitors.<\/p>\n<p>On top of the competition between these groups, there is also the problem that each next block is more complicated to solve than the last, a failsafe built into the blockchain to prevent it from being all unlocked at once.<\/p>\n<p>As a result, the market for GPUs was practically destroyed, with these groups buying all the units they could get their hands on\u2014even <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/redirect.viglink.com\/?key=204a528a336ede4177fff0d84a044482&amp;u=https%3A%2F%2Ffortune.com%2F2021%2F11%2F09%2Fthieves-steal-nvidia-graphics-cards%2F\">stealing them<\/a> in some cases\u2014and making it so regular consumers had to pay <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/redirect.viglink.com\/?key=204a528a336ede4177fff0d84a044482&amp;u=https%3A%2F%2Fwww.nme.com%2Fnews%2Fgaming-news%2F700000-graphics-cards-were-bought-by-crypto-miners-in-early-2021-alone-2973241\">massive prices<\/a> even for badly outdated models. Though, as of late 2021, this arms race is quieting down thanks to a number of factors (including a <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/edition.cnn.com\/2021\/11\/16\/investing\/bitcoin-china-crypto-mining-crackdown-intl-hnk\/index.html\">crackdown on miners<\/a> by China), the GPU market has yet to recover.<\/p>\n<h2 role=\"heading\" aria-level=\"2\"><span class=\"ez-toc-section\" id=\"Mined_vs_Non-Mined_Cryptocurrencies\"><\/span>Mined vs. Non-Mined Cryptocurrencies<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Interestingly enough, though, not all cryptocurrencies are mined. Rather than use proof of work, some currencies\u2014like <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.shutterstock.com\/nl\/image-illustration\/block-chain-concept-consists-network-connections-1064476223\">Cardano<\/a> and <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/ripple.com\/\">Ripple<\/a>\u2014use something called \u201cproof of stake.\u201d They still operate on blockchain for reasons of security, but instead of mining new blocks you \u201cstake \u201d them instead, claiming them for yourself ahead of time.<\/p>\n<p>The more you claim, the bigger the chances you\u2019ll be awarded blocks. It\u2019s a complicated system, even more so than mining, but it could very well be the future of cryptocurrency.<\/p>\n<h2 role=\"heading\" aria-level=\"2\"><span class=\"ez-toc-section\" id=\"The_Future_of_Mining\"><\/span>The Future of Mining<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>This brings us to an important final point: cryptocurrency does need a future beyond mining. Not only is it costly to mine new coins thanks to the price of electricity and GPUs, it\u2019s also <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.reviewgeek.com\/85029\/why-cryptomining-is-bad-for-the-environment-and-how-it-could-get-better\/\">bad for the environment<\/a>, as <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/news.climate.columbia.edu\/2021\/09\/20\/bitcoins-impacts-on-climate-and-the-environment\/\">this article from the Columbia Climate School<\/a> explains.<\/p>\n<p>What that future will be is hard to say exactly: maybe it\u2019s staking, maybe it\u2019s any of the dozen other solutions crypto enthusiasts are undoubtedly thinking up as you read this. Time will tell.<\/p>\n<\/div>\n<p><script>\n setTimeout(function(){\n  !function(f,b,e,v,n,t,s)\n  {if(f.fbq)return;n=f.fbq=function(){n.callMethod?\n  n.callMethod.apply(n,arguments):n.queue.push(arguments)};\n  if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version='2.0';\n  n.queue=[];t=b.createElement(e);t.async=!0;\n  t.src=v;s=b.getElementsByTagName(e)[0];\n  s.parentNode.insertBefore(t,s) } (window, document,'script',\n  'https:\/\/connect.facebook.net\/en_US\/fbevents.js');\n   fbq('init', '335401813750447');\n   fbq('track', 'PageView');\n  },3000);\n<\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. 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Here\u2019s what \u201ccrypto mining\u201d actually is. What Is Crypto Mining? In short, crypto mining is how new units of cryptocurrency\u2014usually called&#8230;<\/p>\n","protected":false},"author":1,"featured_media":380075,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/www.howtogeek.com\/wp-content\/uploads\/2021\/11\/shutterstock_753650251.jpg?height=200p&trim=2,2,2,2","fifu_image_alt":"","footnotes":""},"categories":[18],"tags":[],"class_list":["post-380074","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/380074","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=380074"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/380074\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/380075"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=380074"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=380074"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=380074"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}