The majority of cryptocurrency mining is now conducted in commercial mining farms, essentially huge warehouses running thousands of high-powered computer processors day and night. Mining bitcoins on a personal computer is no longer feasible. Competition for block rewards has led to a computing power arms race as prices have risen. The Bitcoin blockchain adds a new block every ten minutes, and the block reward is currently 6.25 newly minted bitcoins, worth nearly a half million dollars at Bitcoin’s last all-time high. Though the correct answer to these puzzles can be easily verified by anyone on the network, actually being the first to find the answer requires an enormous amount of processing power - and thus electricity - and outcompeting the rest of the network is impractical.įor their troubles, miners collect a reward for being the first to verify the next block. The point of this process is to make adding new blocks so difficult that meddling with the blockchain is prohibitively expensive. Without getting overly technical, this mechanism allows blockchain users - known as “miners” in this context - to compete for the right to verify and add the next block by being the first to solve an incredibly complex math puzzle. Popular cryptocurrencies like Bitcoin, Ethereum, and Dogecoin all employ a “proof of work” consensus method for verifying updates to the blockchain. Updates are added by chaining a new “block” of transaction data to the chain of existing blocks.īut to ensure the integrity of the blockchain, the network needs a way to trust that new blocks are accurate.

Cryptocurrency blockchains generally don’t allow previously verified transactions to be deleted or altered. But making unmediated online transactions securely in a trustless environment in this way is not without costs. Users are thus able to make direct online transactions with one another as if they were trading cash. Just as torrents allow users to share files directly, cryptocurrency blockchains allow users to maintain a shared ledger of financial transactions without the need of a central server or managing authority. Blockchains are, at their core, simply append-only spreadsheets maintained across decentralized “peer-to-peer” networks, not unlike those used for torrenting pirated files.

This should surprise no one who understands how cryptocurrency works. All cryptocurrency and the industry as a whole are built atop market manipulation without which they could not exist at scale. All of it, full stop - not just the latest pump-and-dump “shitcoin” schemes, in which fraudsters hype a little-known cryptocurrency before dumping it in unison, or “ rug pulls,” in which a new cryptocurrency’s developers abandon the project and run off with investor funds.

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