Despite being relatively new to the mainstream, cryptocurrency has been around for a decade. Whilst Bitcoin was the first established currency, the notion of an online digital currency pre-dates even Bitcoin yet were never developed further. Since the inception of Bitcoin, there are now over 1,600 different cryptocurrencies with a new one seemingly launching each week. In this time, we’ve seen a number of headlines around the digital currency market and in particular, it’s volatility.
As with many industries, the cryptocurrency market has given birth its own subset of industry-wide trends. For example, initial coin offerings (ICOs) have gained significant traction in recent years as a way for blockchain-based companies to raise funds for their projects through cryptocurrency. Previously a buzzword for cynics to weigh in on the validity of using cryptocurrency to fund a business, the ICO market only propelled the market forward giving digital currencies a viable reason to exist in a tangible way similar to traditional currencies.
In addition to ICOs, the crypto market sparked a new trend in the form of mining which was first introduced almost immediately following Bitcoin’s launch. In its simplest form, mining is the process of finding coins but in reality, it carries much more complexity to it.
In order to understand how mining works, first you need to understand how it relates to the blockchain. Every transaction made using cryptocurrency is encrypted and added to a block and after a number of transactions have been made, this block is then added to a publicly available blockchain. Due to these blocks being heavily encrypted, it is essentially a difficult equation that only a powerful computer can solve to release the block to a public blockchain. The miner is then rewarded with that particular coin as part of a “finder’s fee” and also increases the coin’s supply.
As with most forms of technology, cryptocurrency mining has come a long way since it was first established. Firstly, Bitcoin can no longer be mined using a standard PC and requires specialised equipment. In addition, the very nature of mining coins has changed.
Mining cryptocurrency was once a unique hobby for crypto fanatics but has now developed into a much more commercial, profitable practice with the formation of mining farms. Typically located in countries with low energy costs, these warehouse-type buildings are full of mining datacentres and specialist equipment that enable mass mining of various coins. These farms are able to solve the mathematical puzzles to release coins at a much faster rate than a hobbyist miner and therefore able to generate larger shares of the coin at an accelerated rate.
Whilst they have garnered some negative attention due to having such a dominance over the industry, mining farms have now become an integral part of the crypto ecosystem by making the network more secure and the industry more profitable.
They also provide the most efficient way for companies to enter the marketplace. As these farms require more resources, they usually belong to a pool of users or business who are able to generate profit from the farm to fund their business. For example, there have been an influx of crypto investment groups who are able to utilise the money generated through these farms to invest in ICOs and game-changing blockchain projects. Despite the criticism, these farms have helped to drive the industry forward and open the gates for a number of markets to explore the crypto space.
Whilst only being around for 10 years, mining for cryptocurrency is still in its infancy with a long future ahead. What’s more, we can expect the space to continue evolving as technologies become more advanced and intricate.
In particular, there is a big shift towards mobile being utilised in the industry. Already we are seeing developers create mobile mining apps that offer the ability for users to mine on their Android devices. Some developers have even gone one step further. For example, ‘Crypto Hunt’, a Pokemon GO-style game that rewards users with crypto coins was launched earlier this year to provide users with new ways to earn coins. However, whilst mobile mining lacks the power seen in commercial mining farms, it’s evident that the crypto ecosystem is continuing to evolve and look for ways to not only stay relevant but continue being a game-changing industry.
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