Crypto platforms require computational power in order to function securely. Cryptocurrency mining is the act of creating new transaction blocks on the blockchain network.
Cryptocurrencies are decentralized and, in order to reach an agreement, miners vote with their computing powers. The blockchain network is supported by millions of high-power computers around the world.
Mining is executed by computers that solve difficult computational math problems. Miners process and verify transactions on the platform. For their efforts, they get rewarded with coins and transaction fees.
The more miners join the blockchain network the more difficulty of mining increases. As a result, cryptocurrency mining becomes more resource-intensive and time-consuming.
Crypto mining makes transfers more free by removing the middleman. Blockchain is controlled by miners instead of the government. Because of this, crypto coins based on blockchain have lower fees ($0,05 to $0,20 average) and shorter transaction time.
In some networks, miners gain unique benefits. For instance, Monero miners are given private currencies that disable others from viewing your balances or monitoring your past activities.
Even though mining sounds great, it still has its disadvantages. Electricity and mining hardware is expansive. Mining requires a high energy capacity and is more beneficial in low-cost regions. However, mining farms aren’t necessarily popular in these places.
As cryptocurrencies become more popular and the number of blocks that can be mined decreases, the miner reward decreases too. In contrast, the number of crypto investors that use tools like a crypto portfolio tracker increases.
AI in Mining
In the last decade since Bitcoin launched, crypto mining has changed drastically. Back then a Central Processing Unit could be used to help the blockchain network operate.
Yet, in order to mine cryptocurrency now, you need to use an application-specific integrated circuit (ASIC). Crypto mining used to be available for pretty much anyone who wanted to make a little money, however, it has become a highly profitable industry. Crypto miners are buying more and more powerful computers in order to be competitive with one another.
It works, however, there are some faults in this method. Mining consumes too much energy and is too expensive. These issues are becoming more popular as the popularity of cryptocurrency increases. This approach works with cryptocurrencies with a Proof of Work (PoW) algorithm such as Bitcoin, Ethereum and Dash.
Mining problems are among the reasons why coins with Proof of Stake algorithms were created. PoS is considered to be more cost and energy-efficient. On the other hand, these crypto coins earned an awful reputation since they were involved in scams and illegal activities. This algorithm isn’t intended to produce coins and, hence, is considered worse than PoW.
Despite all of this, there’s one issue that both algorithms have in common: human error.
Coins are still dealing with cyber attacks and this is for the simple fact that people make mistakes. The solution to this problem is fairly simple, it’s artificial intelligence.
Artificial intelligence, unlike humans, doesn’t make small errors and is very fast. AI can manage and maintain large ecosystems far easier than humans.
Seeing how fast cryptocurrency is progressing, AI might be needed in the field faster than we think. As these digital currencies become more mainstream new hackers will enter the crypto sphere too and security will become a large issue.
As the crypto popularity grows, investing and trading with profits becomes more difficult as well. To become a successful crypto investor check out this guide on crypto portfolio management.