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Highlights
- Crypto mining uses the proof-of-work (PoW) consensus mechanism.
- Mining requires powerful GPUs (graphics processing units).
- Crypto mining has been a boon for GPU manufacturers.
For those unfamiliar with the term "crypto mining", it is simply a process that creates cryptocurrencies. It requires powerful GPUs and lots of electricity. The process involves the application of a proof-of-work (PoW) consensus mechanism on a blockchain.
More importantly, such an operation could be detrimental to the environment because of the high energy utilization in the processes, from mining to circulation.
The higher the demand, the higher the production. So, while one may be fascinated by Bitcoin, the largest by market cap, its processes might damage the environment. Several blockchains are developing new ways for mining to reduce the climate impact.
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What is a Blockchain?
It is a decentralized technology, meaning no central regulations or authority control the data. The crypto transactions are stored on the blockchains, known as a public ledger.
The ledgers are stored on multiple computers (nodes), and anyone can store the data. A copy of the data is stored in each node to secure the user transaction details.
Node users authenticate the transactions and store them in the ledger. It is done mainly through two ways: mining and staking.
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How does crypto mining works?
Crypto mining is the process to create digital coins. Users validate a transaction on a blockchain network and add the data to a distributed ledger, which helps avert double-spending.
The mining process applies the proof-of-work (PoW) consensus mechanism. The miners or users use powerful computers to solve complex computational puzzles in the mining process.
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GPUs draw vast amounts of energy for the calculations used in the mining process, which leave a high carbon footprint because of the higher electricity generation by the plants. In addition, GPUs are expensive and requires high maintenance, adding to the difficulties.
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Miners receive a small number of cryptos each time they solve a puzzle and validate the transactions on a blockchain. However, the reward may vary depending on the cryptos.
Bottomline
The cryptocurrency market has declined in recent days. Various economic and geopolitical factors may have contributed to the decline. However, crypto mining has fuelled gains in the GPU industry. GPU manufacturers like Nvidia, AMD etc., saw significant gains.
