Join NexChange - the professional
network for the financial services
industry - and receive a free one-
year subscription to Forbes
The Companies Behind the Chips That Power Cryptocurrency Mining
Cryptocurrencies have spawned several cottage industries, and one is the manufacture of chips for cryptocurrency mining.
Cryptocurrency is a form of digital money meant to be used as a medium of exchange, and it uses cryptography to secure and verify transactions, as well as to control the creation of new units of a cryptocurrency.
Mining is a decentralized computational process that accomplishes two tasks:
It confirms transactions in a trustworthy manner using computational power.
It creates new digital currency in each block.
Transactions are bundled into blocks. They are then authenticated by miners by checking aspects such as whether same coin has been spent again before the transaction is vetted whether and the input and output amount match.
The header of the most recent block is selected and linked to the new block as a hash. The proof of work problem is then solved, after which the new block is added to the local blockchain and propagated to the network.
The network nodes that assemble the transactions in order to form a new block are called miners. As a reward for the mining, the miner is paid with units of the currency.
To avoid creation of large volumes of new blocks, which could potentially devalue the digital currency, miners are required to solve complex mathematical problems called a proof of work.
Photo: Getty iStock