So, last time, we had an overview of what the blockchain is. This time, we will explore cryptomining, a process by which people can profit off of a blockchain. This involves real-life people in the process of building a blockchain.
The cryptomining process
Due to the fact that there are no central authorities behind a blockchain, it’s hard to see who would maintain it. Who would make sure that every transaction that takes place for a cryptocurrency is legitimate? This is where cryptomining comes in.
Cryptomining ensures is the process where real people validate every single transaction that takes place on a blockchain, forming the blocks. The individuals use their computers to decrypt complex mathematical algorithms so that they can validate a transaction. Crypto miners end up buying computers with huge amounts of processing power to compete with each other. Some even have crypto mining farms, huge rooms with lost of computing power. This is to ensure that they are the first to decrypt these formulas and are thus the first to validate a transaction.
Why do they want to validate the transactions so desperately though? Well, the thing is that people get compensated for every transaction they validate. They get a small amount of a cryptocurrency. In combination, all the profit from validating cryptos can be a considerable amount. These cryptos are ones that have not been in the public domain before. There is a limited amount of cryptos available overall. Slowly releasing them this way ensure there is still growth without inflation.
In the past, the amount a person would receive for each transaction was higher. However, as the amount of leftover cryptos diminishes, so does the price of each coin increase. Therefore, the amount people get from these transactions has to be lower overall.
Now you may be able to see why cryptomining is so very important.