With the craze of a lot of people recently in digital currencies and their widespread spread, you can not avoid hearing a word that says a lot like cryptocurrency mining, which is simply solving some complex mathematical equations through computer programming methods in order to obtain digital currencies, which is very profitable, And if you want to learn more about what is cryptocurrency mining, how does it work and what are the most prominent mining methods? Continue reading the following lines to know the exact answers to these questions.

It is not a traditional currency because it is not issued by a central bank, state or body that regulates and supports it. Bitcoin originated through a complex computer process and is then monitored by a network of computers around the world.

What is cryptocurrency mining?

Cryptocurrency mining is simply a way of creating new coins, however, cryptocurrency mining also involves validating cryptocurrency transactions on the blockchain network and adding them to a distributed ledger (a digital database that records the transaction of assets, each transaction and its details are stored in many different locations At the same time.), most importantly, crypto mining prevents double spending of digital currency on a distributed network.

Bitcoin consumes 0.59% or 131.47 TWh of the total global electricity consumption of 22,315 thousand TWh, and thus Bitcoin needs electricity roughly equal to the size needed annually to produce gold, which consumes 131 TWh per year, and thus it is a huge energy consumption.

Like physical currencies, when one member spends cryptocurrency, the digital ledger must be updated by debiting one account and depositing the other, however, the challenge with digital currency is the ease of manipulation of digital platforms, thus Bitcoin distributed ledger only allows miners who Verified by updating transactions in a digital ledger, this gives miners additional responsibility to secure the network from double spending.

Meanwhile, new coins are created to reward miners for their work in securing the network. Since distributed ledgers lack a central authority, the mining process is necessary to validate transactions, so miners are incentivized to secure the network by participating in the verification process. Validate transactions that increase their chances of winning newly minted coins.

How does mining happen?

Cryptocurrency mining is somewhat similar to precious metal mining, while precious metal miners will uncover gold, silver or diamonds, cryptocurrency miners will release new coins into circulation, so that the miners are rewarded with new coins, they use computer processing power To solve complex mathematical equations in the form of cryptographic hashes, once the equations are solved they are added to a general network of transactions called the blockchain.

Miners compete with their peers for a hash value generated by a cryptocurrency transaction, and the first miner to crack the code gets to add the block to the ledger and receive the reward.

Each block uses a hash function to point to the previous block, forming an unbroken chain of blocks leading to the first block, that's why peers on the network can easily check whether some blocks are valid and whether the miners who validated each block solved the hash correctly to receive the reward.

How do you start mining cryptocurrency?

Cryptocurrency mining requires computers with special software designed specifically to solve complex mathematical and cryptographic equations. In the early days of technology, it was possible to mine cryptocurrencies such as Bitcoin using a simple CPU chip on a home computer. Central processing is impractical for mining in most cryptocurrencies due to the increasing difficulty levels.

Today, cryptocurrency mining requires a specialized GPU or an application-specific integrated circuit (ASIC) miner. In addition, the GPUs of the mining rig must be connected to a reliable internet connection at all times. Each cryptocurrency miner is also required to be a member In an online crypto mining pool.

How Much Energy Does Bitcoin Mining Need?

At the beginning of 2017, Bitcoin was using 6.6 Tw of energy per year. In October 2020, it reached 67 Tw. Now, just a few months later, the number has nearly doubled to 121 terawatt-hours, the Cambridge researchers have found, enough to run their entire university for nearly 700 years. And through those same accounts; If Bitcoin were a country, only 30 other countries in the world would consume more electricity than it. The energy needs of the “Bitcoin country” would have exceeded the needs of the countries of the Netherlands, the Philippines, Belgium, Austria or Israel annually.

However, Dutch economist Alex de Vries is more conservative and sees Bitcoin consumes 77 Tw of energy annually.

De Vries has been following the situation for years and has published his research on the “Bitcoin Energy Consumption Index” on the Digiconomist platform.

Currently, all data centers globally - the ones that run (Tech Big, Cloud, the Internet and the current financial system) - need about 200 Tw of electricity per year, and in his interview with DW De Vries said: Currently, the Bitcoin network consumes About half that amount.

Why does Bitcoin need all this energy?

Bitcoin is essentially a virtual currency, which means that it is operated by a massive peer-to-peer computer network. To keep track of everything and to keep the network safe, it uses a system called a "blockchain", which records all transactions. Everyone in the network gets a copy and it's linked to each other. Given this interdependence, tampering with the system may be next to impossible.

Anyone can become a part of the network. It only needs a high-spec and powerful computer designed for this purpose. The more powerful the computer, the better. Overheating of the hardware should be avoided.

The people who run these computers are called miners, and they don't get regular salaries, but they do have a chance to be rewarded with Bitcoin. The more computing power they have, the higher their chances of acquiring cryptocurrency. The higher the price of Bitcoin, the more investment in it.

“The higher the price, the greater the profit for miners, and the greater the incentive to add more devices to the network,” said de Vries, adding that usage is also important “because the network can only process five transactions per second, and using bitcoin becomes more expensive if many people try to do so.” So. Since transaction fees also go to miners, this in turn increases miners' profits and ultimately energy consumption."

Cryptocurrency mining methods

There are several methods that you can follow in mining digital currencies, we will review them for you below:

• 1. CPU mining:

This method was initially widely accepted and was the first choice of most miners, however many find CPU mining very slow and impractical today because it takes months to accumulate a small amount of profit, due to the high electricity and cooling costs and increasing difficulty across the board.

• 2. GPU Mining:

GPU mining is another method of cryptocurrency mining, which is the most popular in the recent period. It increases the computational power by combining a group of GPUs under one mining rig. For GPU mining, a motherboard, cooling system and rig frame is required, and this method is faster Much more than the previous method.

• 3. ASIC Mining:

Unlike GPU miners, ASIC miners are designed specifically for cryptocurrency mining, so they produce more cryptocurrency units than GPUs, yet they are quite expensive, which means that as mining becomes more difficult, they quickly become obsolete.

• 4. Cloud Mining:

Due to the ever-increasing costs of GPU and ASIC mining, cloud mining is becoming increasingly popular, which allows individual miners to harness the power of large corporations and dedicated crypto mining facilities.

Crypto miners can select both free and paid online cloud mining hosts and rent a mining rig for a specified period of time, this method is the most free way to mine cryptocurrency.

What are the most important bitcoin mining centers in the world?

Recent data from the Cambridge Center for Alternative Finance showed that the United States of America leads the world in bitcoin mining by acquiring 35.4% of the total mining rates of the largest cryptocurrency by market capitalization, amounting to $680.2 billion.

The data published by Forbes magazine indicated that the United States advances one place after removing China from the top position it was crowned with at the beginning of last year, with an average monthly mining speed of 79.53 EH / second, or 53.3% of the total market.

With the development of Bitcoin mining rates in the United States over the past year, the rates in China began to decline to disappear from the rankings permanently during the months of last July and August, coinciding with the Chinese government’s launch of a campaign to prevent the activity of cryptocurrency mining and trading in the country as part of a set of decisions during the months of May And in June, with warning investors against trading in cryptocurrencies, describing these operations as "speculative".

And the monthly mining speed rates in America developed to 42.74 EH / second - the standard of computing power for mining - last August, representing 35.4% of the total countries, compared to 15.74 EH / second, which represents 10.55 % of the total countries in January of 2021.

The last appearance of China in the bitcoin mining data was at the beginning of June at 34.25% of the total bitcoin mining rates, when the monthly mining speed reached 41.12 EH/s, although the absence of bitcoin rates in China allowed the United States to gradually increase the share of global bitcoin mining rates. The International Monetary Fund had previously warned of what it called "the migration of mining activity from China to emerging markets."

The Fund described the movement of Bitcoin mining activity from China to emerging and developing economies as dangerous due to the implications for capital flows, as well as the energy consumption rates required for Bitcoin mining, which is based on solving complex mathematical problems using computing power and then the miners receive rewards in the form of coins new bitcoin.