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Mining

Mining is the core part of any decentralised blockchain. The way mining works is different for each currency, but one thing they all have in common is maintaining multiple nodes which makes up the network maintaining a ledger which is the same in all the nodes. Usually, there are three different aspects to Mining: Maintaining the Blockchain, Validating new transactions and creating new coins which are the incentive for mining.

The first part of maintaining the blockchain is the core part. The data on every node should be uniform. Validation is the process of adding new entries in the blockchain. When someone makes a payment on Bitcoin, a small fee is applied. This fee is shared among the miners since they are validating the transaction. The third part of creating new coins is why people mine. Usually, a complicated math problem is solved by the mining computer and whoever solves it first is awarded one coin. This is done so that miners are given an incentive to run their machines, maintain a supply in the market and at the same time not giving it away for free.

The first option for mining is to run your hardware locally. The hardware required are different for each coin. For mining Bitcoin, you’d need ASIC Chips (Application-Specific Integrated Chips). For Etherium, you’d need GPU (Graphics Processing Unit) for mining. Once you have the right hardware, downloaded the required software and then you can start mining. Your costs include the Hardware, Electricity and Time for which you’re awarded the coins mined in return. The only drawback with this is that it has an entry barrier concerning cost, but you own the hardware, and you can fine-tune it for maximum performance.

Another option is cloud-based mining where you pay for computing resources and is managed by the provider. Cloud-Based mining has lower entry barrier since you won’t need the know-how for mining, but we wouldn’t recommend it since most of them do not give you a good value for money and running your machine would be much more profitable.