THE BIG PICTURE
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Bank of Canada is exploring its own cryptocurrency. J.P. Morgan already uses JPM coin. Thousands and growing list businesses including major household brands such as Amazon, Microsoft and Starbucks already accept payments in bitcoin. Like it or not, digital currencies are here to stay and their existential dependency on miners sets up a solid foundation for your venture.
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MINING EXPLAINED
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Crypto mining, a misnomer, is to get paid for validating transactions. Cryptocurrencies cannot exist without "miners" the same way banks cannot function without its employees. Instead of human resources, miners employ 24/7 specialized equipment designed for such purpose and get remunerated proportionally for their contribution. See below for more details.
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Blockchain
A permanent, immutable, unhackable public record of all transactions held and updated in real time by every participant on the network, hence the term decentralized public ledger.
Anonymity and privacy is preserved since there is no personal details included. Information is simply presented as a certain amount of bitcoin was sent from wallet A to wallet B at T time.
Record
Record of Anna sending Betty one bitcoin is included in this new block along with other transactions to be confirmed
Mining
Miners compete to add the new block on the chain by solving mathematical algorithm and are remunerated in the process
New block
Contains new confirmed transactions waiting to be added to the end of the chain
When Anna sends Betty one bitcoin, this transaction needs to be confirmed on the blockchain network. The transaction is sent and a random math problem is presented.
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The confirmation process plays the same role as a bank employee who will verify that the accounts are valid, there is enough money for the transaction and to prevent duplication and/or fraudulent operations.
Crypto miners use powerful computers to randomly guess the correct number (solution) to the previously stated problem. Once successful, the transaction is confirmed. It is then grouped with other confirmed transactions and loaded in to a block of information. It is then placed on the bitcoin network, chained by mathematical algorithm to other blocks previously created, hence the term blockchain.
The higher computing power you have, the higher the chance of guessing the solution and being rewarded. It is in the miner's interest to find the hardware that provides the best Return On Investment possible. Monthly profit is then a simple calculation of mining revenue minus cost of electricity. Hover your cursor over the image below for more details.