How to mine cryptocurrency

Elon Musk’s bet for crypto mining: how to mine cryptocurrency?

The last few months proved game-changers for the struggling digital currency Bitcoin. It gets a legitimate status following the investment of some Business giants like MicroStrategy, PayPal and Tesla. Following in the footsteps, many other companies are now investing in the virtual coin making it soar higher than any other time in its volatile history.

HOW TO MINE CRYPTOCURRENCY?

Before we begin with how to mine cryptocurrency, let us first explain what actually is mining. Crypto mining refers to the process of adding transactions to the Blockchain, hence verifying them by solving complex puzzles. Mining is used to create new Bitcoins. Mining requires some high tech, advanced computers known as nodes to solve these mathematical algorithms. Let us now jump to how mining is done.

Step#1: CRYPTO DISPATCH: When a user tries to attempt a transaction, he/she sends crypto to another person through a wallet application.

Step#2: BROADCASTING:  When a transaction is made, the wallet application advertises it to be selected and confirmed by miners on Blockchain.

Step#3: SELECTION OF A TRANSACTION: Miners select a transaction to create their own block of transaction. Each block contains a transaction along with some other metadata.  Miners check the validity of the transaction and record them on the distributed ledger (Blockchain).  For example, two miners first check whether the transaction in question is eligible to be added to the block or not by checking certain features of that Blockchain. If the sender has enough funds according to the Blockchain then that transaction is considered valid. This can then be added to the Blockchain.

Step#4: COMPUTING THE SIGNATURE AND FORMING BLOCK: Before the block is added to the Blockchain it needs a particular signature. This signature is known as proof-of-work. The proof-of-work requires miners to solve complex mathematical calculations. These complex problems are unique to every block and need a lot of computational work and resources to get solved. This whole process of solving mathematical problems is known as mining.

In order to understand the process to the fullest let us define some key definitions:

HASH INPUT: This is the string of numbers and data inside a block that is to be mined. In order to form a new block, miners need to solve complex calculations to guess the hash input inside the block.

HASH OUTPUT: Also known as the signature of the block. This is a 32-digit string that miners get after correctly solving the calculations and guessing the hash input. The hash output generated from hash input is always unique for every block.

In the nutshell, mining is done to extract hash output from hash input by solving certain mathematical problems.

Step#5: ADDITION OF BLOCK TO THE BLOCKCHAIN:  The miner, who first guesses the output hash, introduces the newly formed block and output hash to other miners.

Step#6: VERIFICATION OF SIGNATURE OF NEW BLOCK:  Other miners will verify the signature of the block by matching the hash out with the signature of the block. If they match, the miners give their confirmation of validity. The block is now ready to be introduced in the Blockchain.

The whole process of mining requires special hardware specifically designed for mining. In addition to that, it requires a substantial amount of resources such as high-tech expensive computers, electricity, internet connections and proper space to keep and maintain all the equipment. This can have serious environmental hazards. According to a research paper, a single bitcoin transaction has a carbon footprint equal to 359.04 kg CO2. Also, the energy utilized in a single Bitcoin mining equals the energy consumption of 25 days for a standard U.S. household. That is the very reason critics are not in favor of cryptocurrency.

ELON MUSK EFFECT ON BITCOIN

Elon Musk, CEO of Tesla and SpaceX recently announced that Tesla invested $1.5 billion in Bitcoin and that people in the U.S. can now buy Tesla through Bitcoin. Also, Tesla aims at using internal and open-source software. All Bitcoins paid to Tesla will not be converted to fiat money. Critics either applauded Musk for his novel approach to converting the assets or criticized him for associating Tesla with an asset of such high price volatility. The topmost appreciation came from cryptospace, with crypto enthusiasts cheering for Musk or accepting Bitcoin that led to an unexpected surge in the price of Bitcoin settling it at an all-time high price in its history. This initiative was taken as a vote of confidence from the Tesla CEO for Bitcoin, signaling many other investors to pour in. Crypto supporters are positive that this bold step will be a game-changer for the future of virtual currency. Since Tesla signals to accept Bitcoin as a payment method, this move stirred up chaos among many firms to give a second thought about investing in Bitcoin. While many firms have taken the step, many more are expected to follow which indicate that, a much higher value of Bitcoin might be expected.  Although Musk has established himself as a crypto advocate, how much Bitcoin he himself own is still a mystery.  Back in February 2018, Mush shared that he owned 0.25 BTC that too was sent to him by a friend. Now three years down the lane, Musk hasn’t talked about this much.  On the order hand, former White House Communications Director, Scaramucci claims that Musk owns more than $5 billion in bitcoin through Tesla, SpaceX and personal. The investment of Tesla renewed an argument about the hazardous effects Bitcoin mining has on the environment. It utilizes high-tech computers with a lot of electricity consumption leaving a heavy carbon footprint. Many consider it as an odd decision against Tesla’s primary motive of going green. Tesla quotes that the decision to invest in Bitcoin is a part of investment policy aimed to “diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity”. Many economic analysts are not convinced. They consider it more of a risky stunt of speculation than an investment strategy.

BILL GATE’S STANCE ON BITCOIN As much as Elon Musk is promoting Cryptocurrency especially Bitcoin and Dogecoin, some Business giants are still not convinced about it. This holds true for Microsoft co-founder Bill Gates.  In an interview with CNBC Gates pointed out that he has a neutral view when it comes to Bitcoin and also he doesn’t own one. Later, Gate told Bloomberg that he is not bullish about Bitcoin and would recommend people to not jump into the trade. According to the Microsoft ex-Chief, he cited two reasons for his opinion. First, bitcoin mining utilizes a substantial amount of energy. Second, it can cause a lot of trouble for people who don’t have enough money to spare, owing to how volatile the coin is. In addition to this, he is not a big fan of the anonymity of Bitcoin. According to him, the high level of anonymity during transactions and lack of regulations has attracted thefts, money laundering, cybercrimes and terrorist funding causing death to millions of people worldwide.