New York wants to prohibit new crypto mining operations. A bill moving through the state capitol in Albany calls for a two-year embargo on some cryptocurrency mining operations that employ proof-of-work authentication methods to confirm blockchain transactions. Bitcoin is created through proof-of-work mining, which necessitates high-tech equipment and a lot of electricity. The bill's advocates say they want to reduce the state's carbon footprint by cracking down on mines that use electricity from power plants that burn fossil fuels.
So, what is cryptocurrency mining?
The method by which Bitcoin and other cryptocurrencies are generated and the transactions involving new coins are verified is known as mining. It entails massive, decentralised networks of computers all over the world that verify and safeguard blockchains, which are virtual ledgers that record crypto transactions.
Computers on the network are rewarded with fresh coins in exchange for contributing their processing power. It's a virtuous circle: miners keep the blockchain secure, the blockchain rewards coins, and the coins incentivise miners to keep the network secure.
What is the process of mining cryptocurrency?
Crypto mining has two goals: it generates new cryptocurrency and it verifies the authenticity of existing cryptocurrency transactions on the blockchain.
A miner is reimbursed after they complete the process of confirming a block of transactions. And what do they get in return? Newly produced cryptocurrencies to boost their wallets.
How to mine cryptocurrencies?
Anyone with a competent home computer could mine cryptocurrencies a decade ago. However, as the blockchain has grown, so has the processing power necessary to keep it running. As a result, almost all mining is now carried out by specialised firms or groups of people pooling their resources.
The calculations required to confirm and record each new crypto transaction, as well as secure the blockchain's security, are performed by specialised computers. The blockchain requires a lot of computer power to validate.
Companies buy mining equipment and pay for the electricity that keeps it functioning. The value of the mined coins must be greater than the cost of mining those coins for this to be profitable.
Why do cryptocurrencies need to be mined?
Mining is used to create new coins as well as validate existing transactions. The decentralised nature of the blockchain could allow fraudsters to spend cryptocurrencies more than once at the same time if no one authenticated transactions. Mining reduces such fraud and increases user confidence in the coin.