Crypto assets such as cryptocurrencies are created and transacted on networks with varying levels of decentralization. Arguably the most decentralized is Bitcoin (history of Bitcoin), the first cryptocurrency. Decentralized networks do not have a single authority in charge of the network. The network's software is run by individual nodes across the world. Depending on which network you are referring to (i.e. Bitcoin, Ethereum), these nodes play distinct roles in the operations of the protocol. In Bitcoin, the purpose of these nodes is to validate groups of transactions placed together in "blocks". When a block is validated by one node and verified by the rest of the network it is then "mined" and added to the previously chained blocks.
Now that you understand the basics, let's start double clicking in to define the concept. Mining's primary purpose is to secure the network by providing all nodes the incentive to be honest. Miners have a stake in the network and receive a reward validating transactions faithfully. Everyone profits from their honest participation. From the people spending transactions knowing their purchase will go through to the recipients feeling secure they will receive their due, miners provide a beneficial service to all.
Intel's Core i5 chip in my MacBook Pro
As the interest level grew in mining Bitcoin, miners started to figure out how to mine more effectively. Rather than use CPUs, they turned to GPUs since solving the Proof-of-Work algorithm in the Bitcoin network was repetitive in nature. The agility that CPUs offered were actually a disadvantage to specific tasks. GPUs are more flexible than ASICs but less flexible than CPUs. Originally designed to processing graphics, miners realized GPUs were more powerful for competitive tasks (rendering is quite repetitive). This ability to focus on few tasks at higher levels of power made GPUs a more attractive chip to mine certain cryptocurrencies with. Companies who produced GPUs such as AMD and Nvidia have recently seen the price for their products increase dramatically. Gamers who once were the largest segment of GPUs are now facing a massive shortage for the key ingredient to their gaming rigs.Bitmain's AntMiner s9
Powerful companies and groups configure racks of ASIC miners due to their ability to purchase large quantities and configure these mining farms efficiently. One fair criticism of this is that seemingly decentralized networks such as Bitcoin tend to centralize over time. With so much power in the hands of these mining farms, the risk of a 51% attack on a network become more real.In the next series Mining series I will go over network hashrate, ASIC resistance, mining farms, and mining profitability. Hope you learned the basic and high level overview of mining. Thanks for reading as always.
Quantalysus publishes blockchain research and analysis for the crypto community. Please follow on Twitter, Steem (please follow and upvote if you can – thanks!), Telegram channel (New!), and Medium to stay up to date.
My ICO rankings (anything above a 60 by the way I would seriously considering investing in… call me a harsh grader)
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