How Cryptocurrency Mining Works

 

This is oversimplified and doesn’t touch on all aspects of cryptocurrency. It’s just my take on it.


What does it mean to mine cryptocurrency?

Let me try to explain the relevant concepts of cryptocurrency first.

In usual currencies, e.g. the US dollar, there’s someone controlling and printing money, e.g. the US Treasury Department. Therefore it’s centralized.

A cryptocurrency is decentralized, means that it’s not controlled by any bank or government. How then do we print money for cryptocurrencies?

The solution: allow everyone to print money. But very slowly.

This is cryptocurrency mining.

To expand: to mine for cryptocurrency (e.g. bitcoin), someone has to download and run software that solves a meaningless but extremely computer-intensive maths problem, like what is the 1-billionth number behind the decimal place of the square root of 2? (Very wrong example but you get my gist). Someone (Mr. X) will have to run their computer for 1 hour to get this answer, and then the software will give them 1 bitcoin. Then the maths problem iterates to asking the 1-billionth and 1 number etc., and the solving goes on.

The bitcoin is now basically electronic money. Like usual currencies, it is traded in currency exchange markets, which will give you 1 bitcoin equals 100 US Dollars, which of course changes every second/minute/hour/day.


How does it help generate money for websites?

As you can see from the above, basically solving maths problems on computers will generate money.

How do I make it faster?

Solution 1: Buy a faster computer

This is already being done, and miners are buying so much that the supply of fast computers can’t keep up, and are now much more expensive than a year ago.

Solution 2: Use many computers

What if I can use computers that are not mine? Like other people’s computers? Some websites have found a way to make visitors of the websites run a program to solve the aforementioned maths problem for the website. It will run very slowly, but that doesn’t matter to the website owner, because he’ll now have millions of visitors running the program for him all at once.


 

Hopefully that was understandable. It doesn’t touch on many other aspects of cryptocurrency which is even more mind-boggling, but you’re right, it is a very futuristic concept and a whole paradigm shift in thinking about currency. So don’t worry about not understanding about it, you’re probably in the majority.

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