If you’re at all interested in cryptocurrency, then you’ll certainly be familiar with the way that new coins are generated – the strange process of Bitcoin mining. Bitcoin miners are essentially folks who run supercomputers that perpetually try and crack a complex math problem or “cryptogram” to validate the current block (bundle of transactions) and update the distributed ledger.
Bitcoin Mines – Crypto 1.0
Anyone can start a Bitcoin mine, and aside from running a massive number of computers, there’s no way to get an unfair edge. For this reason, Bitcoin mining is fairly diplomatic, with the new coins being spread around at random to Bitcoin mines the world over.
If you’re envisioning a big room of hot humming computers working around the clock, this is actually a pretty accurate image of what a Bitcoin mine looks like. Some ambitious folks have filled entire warehouses with computers to mine the coin. Because each block validation will yield less and less value as the finite number of digital coins becomes less and less (it is predicted that all coins will be mined by 2120), there is an incentive to get while the getting’s good. This mentality is similar to that of mob of prospectors heading towards a gold rush. Eventually, mining will turn up mere dregs in the river of crypto.
This process of mining, of course, is not the only way to get your digital hands on cryptocurrency. For those who have no interest in running supercomputers around the clock, digital platforms and fiat to crypto gateways can walk you through how to pay for Bitcoin with good old fashioned cash.
Energy Concerns – While Bitcoin mines are efficient and democratic, they tend to consume a massive amount of energy, which has the dual drawbacks of negatively impacting the environment and putting downward pressure on the fiat economy. It is estimated that by 2020, Bitcoin mines will consume as much energy per year as the nation of Denmark. Furthermore, because of astronomical energy costs associated with running these computers, it creates a strain on the traditional economy.
Proof-of-Stake: The Future of Crypto?
With the Proof-of-Stake concept developed by Ethereum’s founder, Vitalik Buterin, crypto transactions would be validated by individuals who hold a significant amount of coin through a sort of lottery system. In a PoS blockchain system, there would be a set amount of digital coins, and the miner (or forger, in this scenario), would receive the transaction fee for validating the new block.
This past autumn, Ethereum’s crypto – called ether – took a nose-dive as other digital coins stabilized after a tough summer. This may well be because Buterin and co. are engaged in pushing the boundaries of crypto to reduce environmental harm and branch out into decentralized software distribution and smart contract. This adventurous attitude may cause volatility in the short term, but plumbing the depths of blockchain’s potential may unlock mounds of innovation and money in the long run.
Following the adventures of cryptocurrency provides a wild and exciting ride – one that may define the future of our economy and beyond! The proof-of-work versus proof-of-stake debate is perhaps the central question of the moment in the crypto world.