02/12/2018

Mineable Coins

Cryptocurrency mining describes a process where an individual, group of individuals, or a business, will use high-powered computers to solve complex mathematical equations in an effort to validate a block of transactions.

These mathematical equations are part of the encryption that protects transactions from cybercriminals, as well as other people who shouldn't have access to sender and receiver data.

The downsides of mined cryptocurrencies

Of course, there are downsides with mining. In particular, mining can be very costly because it uses a lot of electricity. Mined cryptocurrencies with smaller market caps usually have less in the way of competition than, say, bitcoin or Ethereum. Mining bitcoin requires specialized ASIC (application-specific integrated circuit) chips and massive servers, which can rack up expensive electrical bills. This means electricity costs come into play, which is a big reason China, a relatively low-cost country for electricity costs on a kilowatt-per-hour basis, is home to four out of five of the world's largest bitcoin mining farms.

 

How does transaction validation work for non-mined cryptocurrencies?

On the other end of the spectrum are non-mined cryptocurrencies, such as Ripple, Stellar, Cardano, EOS, and NEO, to name a few.

Non-mined virtual currencies operate on a model known as "proof-of-stake." There are no high-powered computers and competitions in the traditional sense to see who can be the first to validate a block of transactions, which means the costs for this method are substantially lower. Instead, ownership in a cryptocurrency (i.e., your stake) is your ticket to being able to proof transactions. Think of it this way: The more of a cryptocurrency you own, and the longer you've held that cryptocurrency for, the more likely you are to be chosen to validate a block of transactions. The more times your name appears in the proverbial hat, the better chance it'll be picked out.

Of course, there are fail-safes built in that prevent larger stakeholders from dominating the validation process. There are a host of randomized ways that stakeholders can be chosen to proof transactions, which ensures that smaller stakeholders always have a chance.

Also, proof-of-stake rewards those who validate transactions differently. Instead of being paid in newly mined tokens or fractions of a token, stakeholders receive the aggregate transaction fees from a block of transactions. These fees may not equal as much as a block reward, but understand that the costs of this validation method are much, much lower.

 

Which method is best?

Technically,All Cryptocurrencies are min able. The technique calls for “Proof-of-work” format or ,”Proof of Stake”. You need sophisticated equipment to mine bitcoin and “Proof -of — Work” coins. The other kinds of coins,”Proof — of -Stake” coins  download a wallet, buy a bunch of coins from an exchange. Then transfer them into the corresponding wallet and voila, you will be minting coins.

But, As noted, both methods have their own advantages and disadvantages. But if there is an X-factor here that hasn't been discussed, it's that eventually some of the most prominent mined cryptocurrencies, such as bitcoin, will reach their token supply limit. At such a point, it would only make sense for mined cryptocurrencies to switch over to the non-mined, proof-of-stake method. Since proof-of-stake significantly reduces electricity costs and consumption, as well as takes away the computing network threat associated with proof-of-work, my belief is we'll see a slow but steady shift toward non-mined cryptocurrencies in the future.

In addition to electricity costs, massive mining farms may need to spend quite a bit of money on new equipment, which can go obsolete in a matter of months. Similarly, large mining farms may require cooling systems, since servers and graphics processing units can generate a lot of heat.

The proof-of-work model is also potentially vulnerable to having an individual or group gain control of 51% of its network's computing power. If a hacker or entity gained this much control, it would be possible to essentially hold the network, and its investors, hostage. For prominently mined cryptocurrencies like bitcoin, Ethereum, Litecoin, and Monero, this isn't a big concern. However, smaller cryptocurrencies with long block processing times and weak daily volume could be susceptible.

Top 100 Mineable Coins by Market Capitalization