Cryptocurrency is not under the regulation of a government or bank or any other regulatory authorised body, so there has to be a way to validate and authorise transactions. Transactions are stored in blocks, linked together which ultimately form the Blockchain. For these transactions to be validated and completed, complex mathematical equations must be completed. These algorithms are created using cryptography. Miners are those who solve these algorithms and complex equations with a benefit of being rewarded. Their reward, however, comes in form of cryptocurrency, i.e the cryptocurrency transaction they are validating. This process of getting cryptocurrency has been preferred to trading because it is almost stressless and profitable in some cases.
How the Mining Process Works
The process of mining involves putting together recent transactions into blocks to be linked together to form a Blockchain. Each participant of the mining process is given the opportunity to solve the decrypted puzzle. The first participant to solve the puzzle gets to place the next block on the blockchain and gets rewarded with cryptocurrency. The mining reward is to include both transaction fees (this happens when you mine bitcoins) and the newly released cryptocurrency.
For each validated transaction, a miner creates a node which is added to the database. This is thereafter added to become part of the blockchain. Note that only confirmed transactions are rewarded.
The Role of Miners
Miners ensure the proper confirmation of transactions. Without the help of middlemen such as the government or banks in the system, there has to be a fast, secure way of validating transactions. Miners also help prevent double spending and other problems experienced with the use of fiat currency.
Miners in order to validate the transactions, checks if the signature used during the transaction tallies with the earlier information given as the recipient. They also check if you haven’t spent the inputs you are trying to send. Once confirmed, the transaction is added to a recent list of confirmed transactions, Blocks.
Miners also check if you have funds in the first place. They make sure that the proper requirements are made available such as the account numbers, user’s identity and other important criterium.
Advantages of Mining Cryptocurrency
1. Making Money – At the end of the day, cryptocurrency mining can be a very profitable process. If done correctly, cryptocurrency mining could even replace a full time job. So, one of the largest benefits associated with cryptocurrency mining is the money that you make in doing so.
2. You Always Have Something Of Value – One of the most common questions with regard to cryptocurrency is, “can cryptocurrency crash?” The answer is yes. In fact, in the past, some cryptocurrencies have fallen in value by more than 20% in a single day. However, a cryptocurrency miner uses high-end computers and other equipment. These pieces of technology tend to hold their value very well. So, even if the cryptocurrency you were working to mine happened to crash, you would still have value in the equipment that you used to mine the currency.
3. Cryptocurrency Cannot Be Stolen – Unlike the more commonly used forms of currency, it is theoretically impossible for cryptocurrency to be stolen. As a result, you can rest assured that the money you’re mining for is safe in your account.
4. Safer Than Faucets – Faucets are websites and apps that run the mathematical equations for people, rather than them having to use their own equipment to mine them. However, while there are tons of cryptocurrency faucets that are safe, there are also plenty of scams out there. By mining cryptocurrency yourself, you’ll avoid faucet based scams.
5. You Are Your Own Boss – Once you get good at cryptocurrency mining, it’s possible to replace your day job with the process. In doing so, you become your own boss. You set your own hours and your own rules, giving you the ultimate level of freedom!
6. A Bet Against Centralised Regulation – Finally, cryptocurrency is a bet against centralised monetary regulation. Many ask, “are cryptocurrency exchanges regulated?” The answer is largely no. While in very few countries there is some regulation as it is looked at as a commodity, there are key differences in the regulation surrounding regular currency and the regulation surrounding cryptocurrency. At the end of the day, cryptocurrency is largely untraceable, giving the miner a bit of privacy in how much money they are making and what they are doing with that money.
Disadvantages of Mining Cryptocurrency
1. Risk of Depreciation – Just like any other asset, cryptocurrencies face the challenge of the risk of losing their value such that the value of the cryptocurrency you invested, instead of actually growing, drops over a certain time. In such as a case then the mining becomes a non-profitable activity to the miner.
2. Electricity – The cost of electricity can certainly tamper with your earnings by the means of actually eating into them.
3. Loosing your digital Wallet – This happens in the case where one is locked out in the case of forgetting your wallet’s password. Another case is when the wallet provider happens to run out of business. The sad news, unfortunately, is that one cannot recover his or her wallet once locked out. Aside from that, there is the issue of hackers breaking into and emptying your wallet.
4. Fraudulent organisers – It is no new news to hear of cases of dishonest organisers managing mining pools. Dealing with such is putting your earnings at risk. Engage yourself with a mining company that is already established in this investment sector and one that certainly has a good reputation.
By creating a node consensus mining reward system, Avesta introduces a revolutionary way of mining without pools. Instead of all miners and pools competing, Avesta has developed a way to have all miners working together, giving each miner a fair share proportionate to their contribution. This method prevents so-called orphaned blocks or the “uncle blocks” of the Ethereum based cryptocurrencies. This also prevents unnecessary inflation of currency. These solutions work in concert to provide a rapid and secure blockchain network.
There are always pros and cons to any situation in life. To be able to make a good decision, you need to weigh the good and bad thoroughly before finalising your choice. With Cryptocurrency, it’s more about mass acceptance than technology. The technology is here. Only time will tell when the rest of the world (governments, citizens) will say… YES!