Cryptocurrency Mining: Solving The Mystery

Everyone has heard of bitcoin by now, but there’s a question that remains a mystery to many: where does it come from? The answer, of course, is that it’s mined by modern day “treasure hunters”, or rather entrepreneurial types who see a business opportunity in a hot market.

The precise mechanics of how cryptocurrency comes to exist aren’t all that arcane nor is there much mystique beyond the veil of the unknown. Once you learn about blockchain, decentralized systems and distributed ledgers, this mystery will be solved.

Cryptocurrencies have long been thought of for many reasons, not the least of which is to have a means of trading for value that is private, not influenced unduly by government or other entities or powers and liquid, meaning it can be turned into hard currency—dollars or the equivalent—quickly and easily if necessary. Another reason is that it’s not just an investment or a commodity, but it can be used as currency itself.

In typical banking systems, there is a central authority that is in charge, and a centralized ledger, meaning the power, books, and records are all held by a single entity which wields tremendous leverage due to the concentration of this control. In this vein, traditional banks are centralized, so every single transaction must go through the central banking system to be verified and have records of the details created.

Cryptocurrencies exist in a realm of decentralization, with a ledger that is distributed among many entities, each of which makes records, which are public (although the ownership of the bitcoin used in the transactions is private). There’s not a centralized authority in control, nor is there one single “gospel truth” record of every transaction. Additionally, one may avoid using a central bank to send or receive payments (no Federal Reserve here, folks!).

How do we know for a fact that these transactions are indeed valid and correct? Cryptographic algorithms are used to verify transactions, and that’s where bitcoin miners become involved. They use computers (usually large numbers of of them, working in unison) to solve these equations. In return, they are rewarded with a small portion of the currency mined.

This is the end of the Introduction To Cryptocurrency Mining. Thank you for reading, and until next time, stay sweet and have a great summer!

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