Where do the cryptocurrencies that are mined come from?

Blockchain technology and the cryptocurrencies that have appeared with it in recent months occupy more and more pages in news newspapers around the world.

Where do the cryptocurrencies that are mined come from?

It is the financial sector, at least according to the large number of projects related to it, that takes the cake in terms of the implementation of "blockchain" technology. However, practically no sector of society stays out of this trend that seems to have come to stay and change our way of living on a scale only comparable to the Industrial Revolution or the advent of the Internet. Thus, it is not difficult to find in Coinmarkercap (website where you can see the different cryptocurrencies), projects related to medicine, content management, supercomputing or different online leisure activities such as poker.

But, where do these cryptocurrencies come from that are an indispensable part in the development of these applications? To answer this question, it must be clear that there are two main types of cryptocurrencies: pre-mined and mined. Those sets of cryptocurrencies that have been created from scratch, with no more effort than typing a number on a computer, are called “pre-mined”, something very similar to what the US Federal Reserve does with the vast majority of existing dollars. On the other hand, there are the mined coins, those that need a certain amount of computing power to reach them. Let's explain this last sentence a little better to get a general idea of ​​how this technology works.

Blockchain or "blockchain" technology is based precisely on that, in a series of blocks linked together that function as information receptacles. But these blocks are initially closed and protected by a "hash" that must be found so that they can be opened. The hash is a function that transforms a certain element into another through an algorithm. As we say, discovering this hash allows you to open the blocks, take the reward inside (this is where the cryptocurrencies are) and leave it empty so that it can be used.

Given the initial element and the final element, it is quite difficult to find the function that transforms one into the other. This search process is called mining and high computational power is required to complete it. In addition, it should be noted that as the blockchain gains in length (size) this process becomes more and more complicated, with which equipment that previously served for this work ceases to be useful.

For example, when Bitcoin - the best-known currency - was born, a mid-level GPU was enough to mine from your own home. Today a large number of ASICs (application specific integrated circuits) connected to each other are needed to have any chance of opening the blocks and getting the reward.

In addition, it should be noted that each currency uses a different algorithm, so a mining equipment that serves to mine Bitcoin (uses the Sha256 algorithm) will not necessarily be effective with another currency. Hence, it is vitally important to trace the characteristics of each cryptocurrency and the necessary equipment before launching into a purchase.

Last but not least, anyone who has in mind to mine cryptocurrencies should not forget to give an account of how much the energy consumed will cost, since these equipment require a considerable amount of energy, which causes mining in many countries. cryptocurrency is not profitable.