Mining is a distributed consensus system created to verify pending transactions before adding them to the blockchain.
Cryptocurrency mining works by using either of these two types of validation models – the “proof-of-work” or “proof-of-stake.”
In the POW model; which most popular cryptocurrencies like Ethereum, Litecoin, and Bitcoin Cash use, individuals and organizations compete among themselves with the aid of high-powered computers to be the first to solve complex mathematical problems that are an integral part of the encryption mechanism.
These mathematical problems correspond to a group of transactions, referred to as a block. The first individual or organization that solves these transactions and also verifies the accuracy of the said transactions within a block gets a block reward. A block reward refers to the digital tokens of the currency that was validated.
The second model is the proof-of-stake (PoS) model. The PoS model does not require high-powered computers and mining farms using large amounts of electricity to validate transactions. In this model, stakeholders in a digital currency have the randomized right to verify transactions. The higher the number of cryptocurrency an individual owns, the more likely they’ll be chosen to validate a block of transactions.
While POW networks are massive and work from the consensus of many people, PoS doesn’t have the decentralization feature that makes cryptocurrencies unique, thereby putting the future of the cryptocurrency in the hands of a select few.
As a second income, mining cryptocurrency might not be as profitable as you would like. But, if you’re going into it as a hobby, then crypto mining can generate a small income for you. Luckily, there are regular digital currencies that you can easily access and mine.
You need a few things before you start mining. These include:
Once you have all these things set, you are ready to start mining.
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