Cryptocurrency mining involves verifying transactions and adding them to the blockchain public ledger. Miners collect transactions, organize them into blocks, and hash each transaction and the block header with a random nonce until a valid hash is found. The first miner to find a valid hash broadcasts the block, and if it is validated by other nodes, they are awarded the mining reward. Sometimes competing blocks are found simultaneously, and the block built on first is considered the valid one while the other becomes an orphan block. Cryptocurrency mining underlies the decentralized peer-to-peer nature of digital currencies.

1. Capital Management Services- How Does
Cryptocurrency Mining Work?

2. I will forgive you if you initially think this investment blog post is about smoking
Cannabis and under-age sex. Where these digital asset experts get their subject matter
names from, is beyond me.
Being one of the last of the Baby Boomer generation, in my day mining meant the
extraction of precious metals or coal. How times have changed as we meander
through mankind’s third great revolution –the technological one.
Before I describe how Cryptocurrency mining actually works, prudence dictates I
should firstly cover what Cryptocurrency mining actually is.

4. What is Cryptocurrency Mining?
• Essentially, it is one of the key elements which allows digital currencies to work
as a ‘’Peer-to-Peer’’ de-centralized network. It is a process by which
transactions between users are verified and added to the Blockchain public
ledger. It is also a process which is used to introduce new coins into the
existing circulating supply.
• That is the basics out of the way; now let’s move onto how it works together
with the ambiguous technical jargon associated with it.

6. The Miner
This is a Node in the network who collects transactions and works
to organize them into blocks. When transactions are made, Miner
Nodes receive and verify transactions and add them into the
memory pool, assembling them into a block of multiple
transactions.
Hash
When mining a block you have to ’’Hash’’ each transaction in the
blockchain’s memory pool. Before starting this process the miner
node adds a transaction where they send themselves the mining
reward.
This transaction is commonly known as the ‘’Coin-base
Transaction’’. This is where coins get created and is the first
transaction in a new block.

7. The Hash Tree
After every transaction is hashed, these hashes are organized into a ‘’Hash
Tree’’ meaning that the hashes are all organized into pairs, and then
hashed again until the top of the tree is reached. This is called the ‘’Root
Hash’’.
Nonce
The root hash along with the hash from a previous block and a random number called
the ‘’Nonce’’ is then placed into the block’s header. The block’s header is then hashed
producing an output that will serve as the block’s identifier. Please note, the block
identifier must be less than a certain target value that is set by protocol. In other
words, the block header hash must start with a certain number of zeros.
Hashing Difficulty
This target value which is also known as the ‘’Hashing Difficulty’’ scales ensuring that
the rate at which new blocks are created remains proportionate to the amount of
power in the hash network. The miners keep hashing the header over and over again
through the nonce, until one miner in the network eventually produces a valid hash.

8. The Founder Node
When a valid hash is found, the founder node will broadcast the block to
the network. All other nodes will check if the hash is valid, and add the
block into their copy of the blockchain and move onto mining the next
block.
Competing Blocks
Sometimes two miners broadcast a valid block at the same time and the
network ends up with two competing blocks. When this happens miners
start to mine the next block based on the block they received first.

9. Orphan Block
The competition between these blocks will continue until the next block is
mined based on either one of the competing blocks. The block that gets
abandoned is called the ‘’Orphan Block’’. The miners of this block will switch
back to the miner of the winning block. While the block reward is awarded to
the miner who discovers the valid hash first, the probability of finding the
hash is equal to the proportion of the total mining power on the network.
I bet you this all sounds decidedly complex?
Do not despair as Capital Management Services have a digital currency team
who understand this new market place and how to profit from it.