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What is cryptocurrency mining?
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If you have heard about cryptocurrency, it is possible that you have heard about mining as well. Sometimes it is described as a method of “generating” or “obtaining” cryptocurrency by using your PC or specialized equipment. But what is crypto mining and how does it work? Here we will explain all the basic concepts behind it, so you can use it to your advantage and understand why it appears to be an essential part of any cryptocurrency discussion.
What is crypto mining and how does it work?
Mining itself was invented more than ten years ago when the creator of Bitcoin described its theoretical mechanisms and then launched the process of creating it for the first time. The concept describes a process of getting money for providing your computational power to its network. All cryptocurrencies have their processes of storing transaction records, validating data blocks, and doing more operations, related to keeping all information about transactions in a public ledger, commonly referred to as a blockchain. All operations listed above require difficult mathematical operations based on modern cryptography, which, in turn, requires a high amount of computational power. People can provide their devices for this work and get rewarded. The process plays an important role in sustaining the decentralized network each crypto coin is based upon.
Is mining regulated by law?
Mining looks tempting, especially if you possess a top PC or specialized equipment. But is it legal? In general, yes. But the more particular answer depends on the following factors:
- What country are you situated in?
- What resources do you use for mining?
For example, a careless user can become a victim of mining-related malicious software that discretely installs itself on other people’s computers and then makes it part of a distributed mining network. So, the owner of the software receives cryptocurrency as a result, but the owner of the infected PC suffers from lags, crashes, and freezes. This method of mining is illegal because using malicious software is a cybercrime. One more example of illegal mining – using an illegal connection to the electricity grid. Mining is very energy-consuming, so you have to be prepared for it and be ready to pay for the energy spent.
It is also worth mentioning that in most countries the laws about cryptocurrencies are not formed yet. It can exist in a gray zone or within legal restrictions and requirements, but it can vary in different countries. In some European countries, mining is allowed, as it is considered providing a service.
How does crypto mining work?
In detail, the process differs from one cryptocurrency to another, but they have common basics. Miners provide their computational power to verify transactions and get rewarded for their work. Here is a detailed description, explaining, how cryptocurrency functions and why miners play an important role.
- Let’s imagine that one user sends a certain amount of cryptocurrency to a receiving one, as a payment for a product or service. They do it using their wallets.
- But for this transaction to happen, it should pass the process of verification. It is required to avoid double-spending or money loss. So, this particular transaction along with other new ones gets added to a new block.
- Then the additional information is added, for example, hashes from the new and adjacent block.
- Then miners come into play. They calculate and verify the hash, confirming that the information is true. This operation requires lots of calculations. The longer the cryptocurrency exists, the longer the process can get.
- After the confirmation is completed, the transaction is considered finished. The information about it gets stored in the blockchain forever and cannot be modified by anyone.
Now you see that crypto miners are an essential part of any cryptocurrency, and it would not function without them. Bitcoin is decentralized, and there is no single controlling authority. This means that all tasks that were described above are distributed between many users.
Opportunities of mining
While crypto mining still brings profits to many users, it can be difficult to enter the market now. Here are three main reasons for that:
- Crypto mining demands a great amount of computational power and electricity, and the requirements raise with time.
- For most currencies mining on your home PC is not an option. You will need to buy special equipment or at least invest in an upgrade.
- The ROI for widespread cryptocurrencies, such as Bitcoin, is not that high as it used to be.
If you want to gain profits from the crypto mining process, carefully consider your expenses. It is a good idea not to restrict yourself to several major decentralized currencies. Bitcoin is based on Proof of Work transaction verification, which is very energy-consuming for a miner, but now many more options exist. Besides the most famous currencies, like Bitcoin or Ethereum, you will find hundreds and thousands of offers. At the end of 2020, more than 7 thousand different currencies were represented in the market, and now the quantity has risen even more. Their value changes fast and often unpredictable and fluctuates every day. Do your research, gather information about the coin you are interested in, and probably you will find more profitable opportunities. Now you know, what is crypto mining and how does it work. In general, it consists of complex computations done by many cryptocurrency users. Miners are continuously rewarded for playing their part in providing the sustainability of the network. If you have a powerful PC or specialized equipment, you can enjoy the profits of mining as well, but you will have to take expenses, local laws, and differences between cryptocurrencies into consideration.
In ECOS you can choose different kinds of mining: cloud mining or ASIC-mining.
Cloud mining gives an opportunity to lease real capacity of equipment for BTC mining.
The advantage of ECOS mining among similar services is in the lowest commission at service operators, competitive value of electricity and the absence of tax encumbers. Regarding the fact that ECOS is a resident of a free-economic zone with special tax conditions.
Let’s earn today!
