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Cryptocurrency mining is the process of solving complex mathematical equations (or puzzles) to verify transactions on a distributed ledger. Mining has been around since the emergence of crypto in 2009. A cryptocurrency network exists on a distributed ledger system, often a blockchain or something of similar nature. These sorts of ledgers are comprised of a large network of computers. These computers are called nodes. All of which work together in a peer-to-peer system to validate transactions and create blocks. This process is called mining as it mines both new blocks and more of the network’s native cryptocurrency. In order for a block to be added to a ledger, consensus must be reached among nodes regarding the block’s validity. The process of mining uses mechanisms called consensus mechanisms. There are a number of different types, but the two most common are proof of work (PoW) and proof or stake (PoS) mechanisms. In proof of work systems, miners are tasked with solving an equation to prove the validity of a block. The first node to complete the mining process is rewarded with crypto. The miners competing for the reward are selected at random in PoW systems. Proof of stake systems are for a similar purpose, though they are quite different than PoW systems. In this case, miners with the most wealth (stake) are given the equations. Rather than winning a reward, they are given the fees from the transaction. Mining requires both software and hardware, particularly if you want to earn a significant amount throughout the process. As blockchains continue to grow, the amount of power required increases. Many miners have seized operations as the energy cost was outweighing their earnings. In the world of mining, it is important to look out for scams. For example, a number of malicious miners have hacked into random computers to use their access data. This practice puts your computer, data, and cybersecurity at risk.
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