If you don’t already have a basic understanding of Cryptocurrencies, read our article, here. Once you have a basic understanding of Cryptocurrency, your next question may logically be: What is Crypto Mining? And can anyone do it?
Let’s start with a basic definition of Crypto Mining. Crypto Mining is much like minting fiat money. Simply put, it’s the process of creating of Cryptocurrency. Wait, Cryptocurrencies can be created? Well, yes. Fiat money is created. Cryptocurrencies are also created. Governments control the creation, or minting, of fiat money. And they assign value to that money. As mentioned in our article ‘What is Cryptocurrency?‘, long gone are the days when fiat money was backed by gold. The free market sets the value of gold. But without the gold backing it… Dollar for dollar… The value of money is whatever the government says it is. It is only our trust in the government that gives modern fiat money any value at all.
What is Crypto Mining, And How is its Value Determined?
The free market sets the value of crypto… Just as it sets the value of gold. In other words, supply and demand. Instead of a government arbitrarily assigning value, the free market… Via supply and demand… Sets the value of each crypto currency… From Bitcoin to Doge coin to Ethereum to Shiba… To whichever newest crypto coin just hit the market.
Cryptocurrency Coins vs. Crypto Tokens
Cryptocurrency Coins and Crypto Tokens are both digital assets on a blockchain. A Cryptocurrency coin operates independently… And is native to (is built on) its own blockchain (like Bitcoin or Ethereum). Crypto Tokens, on the other hand, are built on an existing blockchain. Basically, they are crypto built on top of crypto. All tokens are a type of crypto… But not all cryptos are tokens.
While not a physical coin… As you often see in images… A Cryptocurrency coin is used as, well, currency. It holds value and can be exchanged for fiat money, other crypto, goods or services. A token can also hold value and be exchanged. But, most importantly, a token represents access to a physical asset, service, or utility, depending upon the token type.
You can mine (create) both Crypto Coins and Crypto Tokens. By their nature, tokens are easier to mine than coins.
A brief explanation of Several Types of Crypto Tokens
Utility Token
Utility tokens are not investments, so to speak… But rather a mode of access or payment. You would use a utility token to access a service offered on a particular blockchain… Or to pay for a product or service.
Reward Token
Basically, a reward token is a reward … Given to users for loyalty, activity and more. They can have a value, so they can be exchanged for goods or services. Or they can represent an opportunity. For example, a reward token may grant its owner access to special deals that they would otherwise not be able to access.
Security Token
Owning a security token is similar to owning stocks and shares. The owner of a security token has ownership rights to a portion of an asset that has some value… Just like owning stocks or shares of a company. Multiple regulators control the trading and issuance of security tokens.
Non-Fungible Token (NFT)
NFTs represent ownership of an asset… Like digital artwork, audio or video. Ownership of an NFT proves ownership of an asset, both online and in real life.
Methods of Crypto Mining – What is Crypto Mining?
There are two main… And traditional…methods for mining crypto currency. Below is a high-level, basic overview of these types… Along with a teaser for a new crypto mining method… That we will introduce right here, on Molly’s Mobile Multiverse, very soon.
Proof of Work
Bitcoin… the Father of all Cryptocurrencies… Uses this type of mining. Individuals process transactions and secure the network, utilizing specialized hardware for that purpose. As payment for those services, Bitcoin is created and added to the crypto wallets of the individuals providing these services.
Proof of Stake
This is one of the most efficient and popular methods of crypto mining. While Ethereum currently uses proof of work to create new Ethereum coin… It is in the process of transitioning to proof of stake coin creation. Proof of Stake means that an individual can validate blockchain transactions… And mine crypto based on the number of coins they own. Coin owners pledge some number of their coins to be used for verifying transactions. We call this ‘staking’ their coins. This method of mining crypto is both a loyalty reward for ownership in the particular cryptocurrency… As well as payment for the use of the staked (pledged) coin.
Proof of Sensing — NEW
This is the newest method for mining crypto. At present only one program offers this type of mining. Proof of sensing means that you mine (create) new cryptocurrency based on how much you use a certain product or service. We are in a partnership with the creator of Proof of Sensing, and the health-monitoring, Crypto-Mining Watch they offer. You can read all about that, here. We told you that we’re all about staying on top of the latest trends. And we meant it!
Other methods
Of course, there are additional, less mainstream methods. And we should expect new methods to appear on the scene… As existing methods will rise and fall in popularity. The only thing constant is change, right? And necessity is the mother of invention. As new needs arise or come to light, new methods to fulfill those needs will emerge. Because they always do. That’s the beauty of human imagination and ingenuity. So, just stay tuned, right here, for the latest and greatest!
Types of Mining – What is Crypto Mining?
There are currently 3 basic types of Crypto Mining. As with everything else, we should expect to see new innovations in this arena, as well. Because progress keeps progressing!
Solo or Individual Mining
This one is pretty self-explanatory. An individual… Using his/her own equipment and computing power… For his/her own purposes… On his/her own time and resources… mines cryptocurrencies, using one or more of the mining methods.
Pool Mining
This is basically collective mining. It is currently the most common type of mining… Where a group combines their mining efforts. Each user may utilize his/her own resources, as well as shared server resources to mine. This type of mining also makes it easier to meet the requirements of proof of work and proof of stake by combining the group’s work and staked (pledged) coins. Creation of new coin is much faster and more predictable using this type of mining. Once new coin is created, the pool server allocates the coin… Or portions thereof… Equitably among the participants.
Cloud Mining
This type of mining crypto basically outsources the mining process… Renting computing power from third party sources… Who provide specialized equipment designed specifically for mining. This equipment is high-powered… So using it gives you a huge advantage over most individual and pool miners in the proof of work method. Cloud mining does not currently have an application within the Proof of Stake method. But since the most popular… And currently most valuable… Cryptocurrency (Bitcoin) utilizes Proof of Work to create new coin… Cloud mining is definitely something you should consider… If you’re considering entering the world of crypto mining.
We hope you found this article helpful. If you want more info, here is a list of more articles on Crypto Mining. But be sure to say tuned for more info… And the latest and greatest in blockchain and crypto technology! Because we will bring it all to you as soon as it’s available.
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