HomeFinancial PlanningHow are cryptocurrencies created

How are cryptocurrencies created

People who make cryptocurrency are called miners. They are said to be mining a cryptocurrency. Minors are an integral part of the process. Without them, the Blockchain would be frozen. A miner in fact confirms the transactions that take place on the Blockchain.

For example, imagine that Peter gives 3 Bitcoins to Paul. The transaction will be immediately broadcast over the network, peer-to-peer, made up of computers called nodes. However, it is only after a certain period of time that the transaction will be confirmed by the computers belonging to the network using the algorithms specific to said Blockchain. Once committed, the transaction now forms a new data block for the ledger. It is added to others in the existing Blockchain, permanently and immutable.

Behind these network computers, it is miners who validate the transactions. To confirm a transaction, a miner must find the product of a cryptographic function that connects the new block to its predecessor. This is called proof of work. In exchange for their services (and the computing power mobilized for this purpose), they obtain a reward which takes the form of tokens or tokens.

How to mine a cryptocurrency?
To undermine a cryptocurrency, it is usually sufficient to install on your computer software using the processor or the graphics card, or even both, in order to be able to solve the cryptographic problem requiring a relatively large calculation power, which will allow you to touch new units of the cryptocurrency in question.

Be careful, however, the main crypto-currencies have become too difficult to mine for individuals alone. The mining of many of them has become largely professionalized and takes place partly in farms, buildings of several thousand m2 where tens of thousands of servers run day and night to mine cryptocurrencies (Bitcoin, Litecoin, etc.). China once held a prominent place in cryptocurrency mining, but this industry has ceased to exist in the Middle Empire since the Chinese state banned mining or using crypto assets. Thus, in September 2019, 76% of the energy used for Bitcoin mining in the world came from virtual currency miners based in China, a share which has now collapsed to 0. But the US share has jumped. , from 4% in September 2019 to 35% in August 2021. Another beneficiary of China’s withdrawal from this sector: Kazakhstan with a share of energy dedicated to Bitcoin mining of 1.4% in September 2019 and which s’ raises in August 2021 at 35%.

Faced with this competition from farms, cloud mining solutions have been developed. No investment in specific hardware is required. All you have to do is get in touch with a company that has invested in the necessary equipment and “hire” your computing power. But beware, there are many scams!

Which cryptocurrency to mine?
Obviously, individuals are keen to mine the most profitable virtual currencies like Bitcoin, but also Dash, Ethereum, Monero, Litecoin, etc.

However, it is very difficult today to make any money mining cryptocurrency. It is often much more interesting to invest in virtual currency in the hope of making profits.

Miner / developer: who makes the cryptocurrency?
The role of the cryptocurrency miner is therefore to validate the transactions carried out. He is thus paid in tokens of the cryptocurrency for which he has confirmed a new block.

The role of the developer is very different. A cryptocurrency developer will develop the computer protocol at the base of the cryptocurrency which defines in particular the number of tokens in circulation, their speed of circulation, their storage power, etc. He is like the architect of the network.


Most Popular

Recent Comments