Farouk Bahlouli | November 15, 2021 | 4 MIN READ

What Is Mining?

Mining is the computer process of recording and verifying information on the digital record known as the blockchain.

Because mining requires computer power, people do this work in return for money. Each computer that fulfills this process can earn a reward in digital money and sometimes brand new, virgin coins.

To keep the blockchain network running smoothly, only one block can be created at a time. There are several different ways to do this:

• 1. The most common is known as proof of work and it required computers work hard at solving a math problem. The first computer to solve this problem would discover a new block and could record information on the blockchain. This earned them a reward in brand new digital money plus fees paid for each transaction.
• 2. The next mining technique was called proof of stake. With this system, people who represent a large ownership of coins are selected by the software to create new blocks. Competing people are selected on a lottery-system based on chance. With proof of stake, no new coins are created. Instead fees for verifying and recording transactions are collected.

With over 1,000 cryptocurrencies and many more being created each month, new ways of mining are being explored and discovered.

What is a smart contract?

A smartcontract mixes blockchain technology with contracts to make a more efficient and affordable system of doing business. In a smart contract, two people doing business agree to exchange money for something else. If the requirements set by both parties of the contract are met on a date, it activates, delivering what was purchased. If the requirements are not met, the contract deactivates and returns whatever it was storing.

For example, Alice wants 1 bitcoin from Lance and Lance wants $5,000. Both Lance and Alice agree that on January 1, 2018, both the bitcoin and cash will be deposited to the accounts linked with the smart contract. On January 1st, the contract looks to see if both people fulfilled their obligations. If so, it will release the payment and bitcoin to their new owners. If not, the bitcoin and money are returned to their original owners. Because the contract is publicly available and unalterable, it is very easy to keep both Lance and Alice responsible for their end of the deal. If anyone somehow violates the agreement, the proof of what they should have done is easily obtained.

Read More: The Basic Info of Cryptocurrency!