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Crypto Mining – Mind Blowing Backbone of the Blockchain Revolution

We all know that fiat currency across the world is printed by government bodies and central banks, but have you ever wondered how cryptocurrencies come into existence on digital platforms? Cryptocurrencies are the most trending global financial instruments today. Many individuals, governments and organisations from all over the world are trying to test the waters either as investors, cryptocurrency owners or mining farmers. Digital tokens provide comprehensive, easy and cost-effective payment mechanisms and transaction platforms. However, little has been written about the ballooning crypto mining infrastructure and the evolution of the blockchain network beyond just supporting a payment system to emerging as a multi-industrial revolution. Well, this article aims to give you a comprehensive insight into cryptocurrency mining, its nuances and how crypto mining today is as lucrative an activity as investing in cryptocurrencies itself. We will also look at how blockchain, the backbone infrastructure of cryptocurrencies, is poised to be a global game changer much like the internet revolution that emerged in the 90s and hasn’t looked back since then.

What is Crypto Mining?

Crypto Mining

Crypto mining essentially is the process by which new digital tokens or coins are issued or created by solving mathematical problems, opening new blocks, chaining together blocks of transactions (hence the name ‘blockchain’) and approving other users’ transactions on the internet. However, crypto mining is not merely restricted to the issuance of new digital tokens. More importantly, miners help with transaction validation and completion so that none of the users can spend tokens that have already been spent/blocked on another transaction. Simply put, miners help provide security to crypto transactions. The more miners on the network, the more secure the network is. Their primary take away from this process is transaction fees and new digital coins. These new digital coins come as a fixed percentage of what they have mined and for their time spent mining on the blockchain network.

Crypto investors buy various digital tokens hoping the value of these tokens would go up thereby enabling them to sweep a neat profit. However, few investors and opportunists with the necessary economic outlay at their disposal have surpassed this investment node. They have moved to pump in their stakes in building the infrastructure around blockchain instead. Miners usually start mining as a hobby or an interest. Soon, they realise the immense potential behind it, taking it up as a full-time activity to set up cryptocurrency farms and data centres. As the popularity of cryptocurrencies has grown, so have the transactions. Hence, benefiting from economies of scale through facilitating these transactions is where most of the moolah is raked in as transaction fees. Most mining farms get 95% of their income from commissions rather than from mining new coins. This trend is only going to increase as more and more people join the blockchain currency party.

Trends in Crypto Mining – Mining Farms, Cloud Mining & Mining Pools

However, building mining farms is certainly no simple feat. Crypto mining hardware involves highly specialised computers and mining hardware and is an expensive affair, to say the least. Heat sinks, water blocks and fans are commonly found across all large mining farms. Cheap electricity is a definite pre-requisite as these data centres are thermally regulated and work as a collection of large systems. Research shows that leveraging the benefits of economies of scale, mining farms reach break-even between seven to nine months on an average. With factors like cheap electricity and economies of scale, it comes as no surprise that more than half of the large-scale industrial mining farms in the world are said to be on Chinese soil.

Recently, many decentralised platforms have sprung up to address gaps such as expensive mining equipment and heavy reliance on electricity. OddoCash, Terraminer and Miner One are some of them that leverage the benefits of mining pools. Mining pools are groups of miners that come together to form a co-operation that works together to share block rewards based on their mining power. Mining enthusiasts are also increasingly dipping their toes in cloud mining or cloud hashing. Cloud mining enables users to purchase a part of the mining capacity of hardware stored in data centres. All the mining is done remotely on the cloud without having to deal with the hassle of electricity, software or bandwidth issues. However, much is being said about whether cloud mining is a legitimate and verifiable mining method.

The Blockchain Bandwagon

Blockchain now promises to change how various industries work. It will not be just restricted to cryptocurrencies and payment/transactions systems. The blockchain network is being heavily leveraged across various industries like travel & leisure, healthcare, legal contracts, media & music and much more. Some notable applications of blockchain and ideations that have emerged in the recent past paving way for further ideation are:

  • German airline Lufthansa is exploring the opportunity to build a blockchain based travel app for ticket sales, customer service and much more
  • Canadian microcap Fintech is exploring how the benefits of cryptocurrencies can be wrapped around the ATM network enabling customers to buy digital tokens from physical locations
  • Cryptocurrency exchanges and market indexes tracking the movement of the top 15 cryptocurrencies is also in the fray.

Such trends indicate that the focus has now moved from digital coins such as Bitcoin, which spearheaded the cause of blockchain, to the more important focal point of the underlying infrastructure, the delivery process of blockchain and the immense financial viability of the same.

One thing is for certain, the blockchain technology is here to stay and smart investors are looking at this boom in a smart way. The trajectory of the blockchain bandwagon makes one reminiscence of the dot-com bubble back in the 90s. From being referred to as a bubble to the advent of the Internet of Things today, we can only imagine how blockchain and mining farms are going to shape the future. Whether one is bullish or bearish on currencies like Bitcoin is secondary; the blockchain technology and its expansive infrastructure is the place to be.