How Are Miners Earning Cryptocurrency?

If you are planning to be a miner, it is important to note that cryptocurrency

mining is highly competitive due to its rise in both popularity and value.

Now the competition includes organizations and companies with more

extensive resources than most individuals can compete with. But don’t let

this discourage you from making your first mining rig! Cryptocurrency

mining in 2021 is worth it and with the right hardware, mining

algorithm, and mining pool it can be proven a very lucrative endeavor!

The verification process encompasses competing with other fellow crypto

miners to “crack the code” by solving complicated math problems using

“cryptographic hash functions”.

So what are cryptographic hash functions? Without going deep in the rabbit hole,

a cryptographic hash function is an algorithm (e.g. a set of procedure

performed by a computer program) that can be executed on or against an

individual data file or a password to produce a unique value called a

checksum. It is synonymous to a human fingerprint.

This is how authenticity of a piece of data that is associated with a block containing the

cryptocurrency transaction data is verified. The first cryptocurrency miner to

solve the math problem or crack the code is rewarded.

WORK PERFORMED

The effort or work performed by cryptocurrency miners consists of the following:

-Verifying and validating new cryptocurrency transactions

-Storing those cryptocurrency transactions and organizing them into a new block

-Adding the new block to the digital ledger’s chain of blocks (the blockchain)

-Broadcasting the new block to the cryptocurrency node network

BLOCK REWARDS

For doing the above work, cryptocurrency miners are rewarded a

transaction fees and block subsidy in the form of small amounts of

cryptocurrency.

A Transaction fees is a small fee paid by each person

spending the cryptocurrency to produce a record in the blockchain by

having the transaction added to the new block. The miner adding the block

receives the transaction fees.

A Block subsidy is a newly created cryptocurrency that is paid to the miner who successfully adds a block to the digital ledger. The combination of subsidy and fees is called a

block reward.