Before delving into the mechanics of a Mining Rig and how it earns money, it is imperative to understand the fundamentals of cryptocurrency and blockchain technology.
Watch the following quick guides to enhance your understanding and appreciation for cryptocurrency and blockchain technology.
Whilst watching these guides, we welcome you to write down any questions and send them to us at firstname.lastname@example.org.
After watching the short video above, you should have a basic understanding of why Bitcoin was invented, what it aims to achieve and the potential it holds for global transactions.
The main purpose of cryptocurrency is to eliminate the 3rd party administrator (e.g. the bank and the credit card company). The reason it is beneficial to eliminate the 3rd party is because it leads to increased privacy, efficiency and flexibility in business.
Consider the following example where we compare transferring money overseas through traditional banking, to using blockchain technology.
The average consumer who wants to transfer funds overseas via the banks SWIFT payment system will pay a $30 international transaction fee and it will take between 3-5 business days before it arrives at its destination.
Using blockchain technology, such as transferring with Ripple coin, a consumer can transfer money overseas for a fraction of the cost and it will arrive at its destination within minutes.
You should now have a fairly comprehensive understanding of what blockchain technology is and why it is so powerful in our technological society.
Now that you have an understanding of what blockchain is, you can begin to grasp the concept of “solving the cryptic puzzles” also known as mining.
Each blockchain is written in cryptic language, the reason for this is it allows everyone to have public access to the blockchain (record of transactions), however it avoids any individual from altering the record of transactions as they are protected with cryptography. This creates efficiency as there is no need for the 3rdparty bank or credit card company to charge administration fees. It also creates privacy because no single person can alter the blockchain, it must be approved by a certain number of peers.
After watching this video, you should have a basic understanding of what mining is, why mining is a fundamental aspect of blockchain technology and how a miner gets paid for its work.
In summary, mining is the process that a powerful computer (Mining Rig) goes through to process transactions on a public ledger called the blockchain.
Mining is a fundamental aspect of cryptocurrency, without it there would be no record of who owns what amount of bitcoin and other cryptocurrencies.
A miner is paid for its work when it solves a series of cryptic transactions . Those transactions are then recorded on the blockchain and the miner who solved the cryptic puzzle gets paid for the transaction fees on the ledger that it solved.
Sign up to our Newsletter