What is Cryptocurrency mining and How Does it work?
What is Cryptocurrency Mining and How Does it work?
Hi Bhaneeta. Blockchains thrive on the idea of being a peer-to-peer networks where everything is reliant on the users of the network itself, along with the process of maintaining and validating information. To keep the blockchain transparent and functional,"mining" is used to incentivise the process. Users who validate and add transactions to the blockchain, referred to as miners, "earn" a reward in the form of cryptocurrency. This process is called cryptocurrency mining. Through such rewards, it remains in the best interests of the miners to ensure they validate all transactions and only include the validated ones to the block and append it to the blockchain. Thus, the blockchain maintains its integrity and miners receive fungible coins, keeping both parties better off. The process of validating and creating a block is very computationally expensive. In order to earn a reward in cryptos, a miner must add a valid block to the blockchain, and that block's hash must match or be below a certain target value. Since hash functions used to create these hashes are non-invertible, it requires a lot of trial-and-error attempts to reach the target value, making it more competitive and hence, leaving little to no incentive to add inaccurate or incorrect transactions into the block [cost of attempting to add bad transactions > reward obtained from mining]. I hope that answers your question!
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