Who are the miners?
Updated: Aug 11, 2021
We have explained that crypto coins are generated inside the blockchain, as a result of solving complex algorithms. But who is working to find these solutions, therefore creating new coins? The answer is the miners (with some exceptions like Cardano)
Miners are a fundamental piece inside the cryptocurrency world. They are the ones “mining” new solutions for the algorithm, extracting coins, adding new blocks to the blockchain, and verifying the transactions.
Their work is becoming more complex every day, as miners grow in number. Bitcoin, as an example, is designed to increase the complexity of mining new coins if the number of miners grows higher, to keep the rate at which these are generated somewhat constant. To extract the crypto coins, the miners run “mining rigs”, specialised machines (computers) tuned to perform a high number of calculations each second (the so called hash rate). Given the amount of cycles they need to complete, the equipment is highly sophisticated, tailored for mining, and usually energy intensive. That’s a draw-back of mining… in most cases is not environmentally friendly.
In the early days, it was possible to do mining with just a desktop computer, because those were the first solutions to the algorithms. Now, every time someone tries to find new solutions for the algorithm, they need to run more and more iterations, and therefore need more computing power.
Once a solution is found, a new coin is generated. That new coin then needs to be validated by the blockchain (here miners comes again into the game), and if there are no issues with it, the miner will receive tokens as a reward. Miners receive a percentage of crypto-coins as a “payment” for their work.
This way of processing data is know as “Proof of Work”: data which is very difficult to generate, but with low effort to be verified once created. Check our posts about Consensus Mechanism to learn more about this.