Proof-of-Work is a mechanism that enables users to agree on the state of the blockchain, known as achieving distributed consensus. By ensuring that the network agrees on the same version of history security and trust are established.
POW is an algorithm that requires an individual or a computer to perform some kind of work (solve a complicated mathematical puzzle ) before creating new blocks or adding to their existing blockchains. This work is called mining, and it has two purposes:
- 1.To create new blocks for the blockchain
- 2.To confirm transactions between peers to prevent double-spending.
The mining process includes solving cryptographic puzzles that require a lot of computational power and time. Miners compete to solve a computational puzzle and produce the next block on the blockchain. The first miner to solve the puzzle gets rewarded with coins and transaction fees. This work aims to make sure that the blockchain cannot be easily tampered with and that the transactions are verified.
Mining algorithms are a set of mathematical functions that are used to secure cryptocurrency networks, verify transactions and produce new coins. An algorithm hashrate is the rate at which a specific algorithm solves cryptographic puzzles.
One of the most critical factors in determining the security of a blockchain is its hashrate. Hashrate refers to how much computing power is devoted to mining that blockchain. The more computing power devoted to mining, the more difficult it becomes for an attacker to overpower the network with their own computing power. This makes it exponentially more difficult for an attacker to reverse transactions, which would otherwise allow them to spend currency that they never had.
There are several methods that you can use to mine cryptocurrencies depending on how much you can afford to invest and the type of currency you wish to earn.
Application-Specific Integrated Circuit (ASIC)
An ASIC is a computerized device that is developed and used for the sole purpose of mining a single cryptocurrency. Due to being purpose-built for mining specific cryptocurrencies, ASIC machines are costly however they are much faster than other computers.
GPU mining requires a gaming computer’s graphics card and equally good optimized mining software to get results.
It is possible to mine crypto using a computer's central processing unit however results will be minimal as a CPU doesn't have the processing power to compete against an ASIC or GPU.
Miners work as a team and share block rewards paying a small percentage of the reward as a pool fee.
Mining on your own!
If you trust a company to mine on your behalf with their own devices and don't mind paying the fees then cloud mining may be for you.