Cryptocurrency is created through a process known as “mining”. However, the process differs from one cryptocurrency to another.
Bitcoin Mining – produces new bitcoins that are then entered into circulation. Bitcoin mining also maintains and develops the blockchain ledger. Miners use highly sophisticated computers capable of utilising algorithms to solve complex mathematical problems that in turn produce the bitcoins. These miners are sometimes referred to as digital excavators. The creator of bitcoin has deemed that there can only be a total supply of 21 million bitcoins.
Bitcoin miners compete with each other to add new blocks to the blockchain. This is how new bitcoins are released into circulation. They also audit, validate and verify the legitimacy of every bitcoin transaction on the blockchain. This is known as Proof of Work”, which requires serious computing power and uses an enormous amount of energy.
Whoever solves the equation first and adds the next block to blockchain is paid 6.25 bitcoin roughly the equivalent of USD 295,000. All winning blocks are verified by all the other miners. They also retain each transaction fee within that block being USD 20 per transaction.
Ethereum Mining – In many ways Ethereum mining is the same as Bitcoin mining, insofar as they have different miners competing against each other to solve complex mathematical equations. The winning miner or node is rewarded with 3.5ETH. However, Ethereum works with a centralised software platform, and unlike Bitcoin has a central office.
The major distinction between Ethereum and Bitcoin is that Bitcoin is a currency and Ethereum is a “Ledger Technology”, and whilst both are based on a blockchain, Ethereum is the more powerful of the two. Ethereum uses the proof of work for validation.
However, unlike Bitcoin, the Ethereum blockchain contains a feature that makes mining more difficult as each blockchain is produced. Eventually this will lead to what is known as the “Ethereum Ice Age”. Ethereum will then move from proof of work to proof of stake which is explained under Cardano Mining,
Tether Mining – Tether coins or stablecoins are not mined like Bitcoin. They are known as a stablecoin, which means they are tied to a Fiat Currency such as the US Dollar. (Fiat Currency are government issued currencies that are not backed by commodities such as gold. Examples of such currencies are the US Dollar, British Pound, The Euro etc). Every time a client places USD 10 in their Tether Account they are issued the same in crypto stablecoins. Each coin is worth 1 US Dollar.
Cardano Mining – Cardano tokens cannot be mined like Bitcoin and Ethereum. Both these crypto currencies use proof of work for mining coins/tokens and for validating. Cardano uses “Proof of Stake” which means the more coins that a miner owns the more power they have to validate transactions. Therefore, if a miner owns 5% of the coins in circulation, they can only mine 5% of the blockchain. Miners are therefore using less energy than their counterparts at Bitcoin, who sometimes have to sell their coins to pay for their energy bills.