How Does Ethereum and Bitcoin Mining Work? Who Makes the Most Money?

Cryptocurrency mining is the process of adding transaction records to the ledger of past transactions. Not a simple process in any way, mining requires a lot of computational processing power and time. For the service of providing solutions to the complex mathematical problems, the miners are rewarded. It’s done by utilizing the computer’s hardware for mining applications.

All the transactions of cryptocurrency are embedded in data blocks and each block is linked to other blocks. Hence the ledger they make up is also known as the Blockchain. To have a smooth running of all the transactions, all the data blocks must be analyzed as quickly as possible. The issuers of cryptocurrencies simply do not possess the capability to handle all of this alone. Enter the miners.

A miner is someone who invests time, effort and computer space to sort through the blocks. When a block of transactions is created, the miners put it through a process. The information from the block has a mathematical formula applied to it which turns it into a shorter sequence of apparently randomized numbers and alphabetical letters. This sequence is called a hash. The hash is then stored at the end of the Blockchain at the current point in time.
Issuers reward the miners with a portion of the transactions they’ve verified or digital coins of the currency they’re mining. In the traditional process of mining, the precious material that has to be excavated and purified has to be found. Same is the case with digital currencies. This process of ‘digital mining’ has to take place in order to uncover the digital currencies and put them into circulation. This is why the term has stuck and is used in the context of cryptocurrencies.

Bitcoin introduced this technology and Ethereum mining differs from Bitcoin through various technicalities. The block time in Ethereum is set to 14 to 15 seconds as compared to Bitcoins 10 minutes due to the fact that Ethereum uses Ghost protocol. This allows for faster transactions. The economical model of Ethereum is slightly different from Bitcoins in that Bitcoin halves the block rewards every 4 years while Ethereum releases the same amount of Ethereum each year adding to the total amount.

To think about which one of the two earns more money, the question has to be looked upon with a broader view. One would think at an immediate glance that Bitcoin is earning more. While that may be true right now, there is more to consider than just the current market caps of both the cryptocurrencies. At the time of writing, the market cap of Bitcoin is at $72,938,686,339 USD while it was $9,742,370,000 USD the previous year. While the market cap for Ethereum is at $28,436,896,958 USD compared to $1,102,940,000 USD a year before. The growth of Ethereum has been phenomenal.

After all the facts are considered, Ethereum can be looked at more than just a cryptocurrency. It’s a proper infrastructure while Bitcoin is just Bitcoin. Ethereum will be making more money in the future.

Facebook Comments

Related Articles