Mining Ethers on the Ethereum Network – Part 2

The ethereum network keeps running because of all the computers in the world that run Ethereum client software. An ethereum client is a piece of software that contains full Ethereum network blockchain and is able to verify the activity of the blockchain. Miners who successfully complete blocks earn rewards in the form of ether, which is Ethereum network currency.

 

Mining in the Digital World

The term mining can be somewhat misleading to those who do not know much about the world of blockchain and cryptocurrencies because it may evoke an image of people doing hard manual work. In reality, nothing like this happens with cryptocurrency mining, be it bitcoin mining or mining of ethers.

In the blockchain world, mining is a computational process during which computers try to come up with a string that satisfies the conditions of a specific blockchain network. When you become a miner on the Ethereum network, you become a part of the network and contribute to its functionality and security by allowing the network to use the computational power of your hardware.

This being said, the reason the process of obtaining new coins on cryptocurrency networks is called mining is that there are several large similarities between the mining of precious metals or other commodities in the real world and mining on a blockchain network such as Ethereum or Bitcoin.

 

Similarities Between the Mining Cryptocurrencies and Mining Tangibles in the Real World

The first similarity is that when mining occurs, the supply increases. When miners were digging up actual gold during gold rushes, gold was entering the circulation. The same happens with digital currencies. As miners mine coins, there are more digital coins in circulation. The difference between digital coin mining and mining of physical commodities is that the supply of digital coins is severely restricted and it is not possible to mine a large number of coins in a short period of time. Major blockchain networks such as Bitcoin, Ethereum, and Litecoin, have very strict rules in order to prevent currency devaluations and an influx of a significant number of coins into the network.

The second commonality between cryptocurrency mining and mining in the physical world is that as the mining becomes more popular, the supply of the resource decreases. In the real world, it typically happens when miners exhaust mines and extract all the precious resources available in certain areas. After this happens, they either need dig deeper, which requires more work or investing in more sophisticated and expensive equipment, or move to a different area.

Most blockchain networks emulate this process by using the notion of difficulty. During the initial stages, a blockchain network typically has just a few miners and the difficulty factor is low. As the network becomes more and more popular and the number of miners increases, the difficulty of mining also increases. This is what has been happening with both the Bitcoin network and the Ethereum network. If for some reason the number of miners starts to go down, the difficulty will also go down, making it more attractive for new miners to join the network.

 

What Happens During the Mining Process

Both the Ethereum and the Bitcoin networks are blockchain networks. The easiest way to understand a blockchain network is to think of one in terms of a ledger with a list of transactions. Bitcoin and Ethereum are decentralized networks, meaning that there is no one central place that keeps the list of transactions. Instead, every software client on the network has a full copy of the ledger. This is what makes the blockchain technology and blockchain networks, including Ethereum and Bitcoin, so secure: even if something happens to a number of machines on the network, the network will keep operating will every client has a full copy of the ledger.

The ledgers on blockchain networks consist of blocks. One of the goals of the bitcoin network is to create a new block every 10 minutes or so. On the Ethereum network, blocks are smaller and miners create them much faster, in about 10 seconds per block instead of 10 minutes on the bitcoin network.

Because both networks are fully transparent and open, you can see the full history and details for all the blocks online for free, including the time it took the network to create a block. For bitcoin network, you can do that at https://blockchain.info/ and for Ethereum network information you can visit https://etherscan.io/  

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