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Cryptocurrency for Beginners

What does it mean when a cryptocurrency is mined?

2 min read
When a cryptocurrency is mined, this means that it requires data-miners (a.k.a. cryptominers) to create the new cryptocoins by verifying transactions. Crypto mining is what powers the blockchain.

What does it mean when a cryptocurrency is mined?

When a cryptocurrency is mined, this means that it requires data-miners (a.k.a. cryptominers) to create the new cryptocoins by verifying transactions.

Each cryptocoin is a bank, a currency and  payment network. Crypto mining is the process that powers the payment network (a.k.a blockchain).

 

What does it mean when a cryptocurrency is mined?

When a cryptocurrency is mined, it means that a people (ideally around the world) have programmed their computers to verify the transactions of the cryptocurrency.

Remember that each cryptocurrency runs on a different software (algorithm or Blockchain) so the algorithms might be different, therefore miners might need different types of computers to verify transactions of the various cryptos.

 

Why are cryptocurrency even mined in the first place?

Cryptocurrencies were designed as solution to inflation as governmental issued currencies were losing value as prices of basic goods kept on increases and people could by less thing.

The prices of cryptocurrencies are based off of demand and supply, and many people that this is the real value compared to governments who decide on the value and supply.

The concept of mining is from the principle the cryptocurrencies are not printed out of thin air and cost energy unlike regular money.

 

Why is it important for investors to know whether a cryptocurrency is mined

The biggest criticism of Bitcoin is that it’s a great investment but not practical to use as a currency to replace the dollar because its value is too volatile and there are too many zeros for an everyday user.

So other alternative cryptocurrencies were created to act as better competitors.

These cryptocurrencies have higher volume to prevent the prices from skyrocketing as much as Bitcoin over time.

And this is what created a big divide over the purpose.

 

Currency vs Investment

Bitcoin maximalist argue that a true currency like gold or precious value over time should gain value.

However on the other side, they argue that a currency whose value changes by 50% overnight is too risky for business to accept as payment.

 

How  a cryptocurrency’s prices affected when it’s mined

The idea of mining is gradually releasing a cryptocurrency onto the market through mining and as it gets adopted prices increases as demand increases.

This is important because there are over ten thousand cryptocurrencies so the chances of adoption are quite slime.

 

What does is mean when a cryptocurrency is NOT MINED?

Non-mined tokens such as ERC20 (Ethereum) and BEP-20 (Binance) tokens have a gas/fuel system.

Just like you pay gas to fuel your car, the investors pay for “gas fees” to fuel the transactions.

The problem is that the technology is not complete yet and this results in “gas fees” increasing as demand increases.

And investors find themselves having to pay out gas fees which can be anywhere from a third to the investement to 5x times more.

 

Mined vs Not Mined cryptocurrencies – how do they compare

  • Who pays for transaction fees
  • Which is one is designed for investments
  • Currency vs investments

 

 

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