What Is a Mining Farm and How Does It Work

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A mining farm is a common enough term thrown around in the world of cryptocurrency and crypto tokens. That isn’t to say, however, that everyone understands it or that anyone can make one. It takes sheer dedication and a truckload of capital to get started on one, but it doesn’t mean that it’s impossible for the layman or you to understand the concept.

In the last few blogs, we discussed the blockchain and the need for mining. In case you missed out on that, let’s have a quick recap, shall we?

What Is Meant by Mining?
With regards to the context, mining is the process of validating a transaction made in a cryptocurrency, recording it into the blockchain, and receiving a reward for doing so.

What Kind of Reward?
It can differ from blockchain to blockchain, but most commonly the reward is in the form of Bitcoin, as it has the highest fiat monetary value.

Why Is It Necessary?
Think of it as a freelance job for the people who mine, also known as ‘miners’. These people must have a high level of skill in encryption and in finance, so they are necessary to update the online ledger that is the blockchain. It’s a more cost-effective alternative to working for the company at a desk job, but still doing essentially the same job as a banker. Obviously, as a banker needs payment, so too must the miners be paid, and Bitcoin is a very popular payment form.

Ok, so we’re caught up with our previous discussions about Bitcoin and how important the miners are to the community. Something that is essential to understand here is that the blockchain can only be updated by these individuals, not altered (the cliché term being immutable). These people have a copy of this ledger, and if some person’s ledger is out of sync, they cannot use it until it is corrected. For example, if you were to buy Bitcoin instantly with a credit card, people in the system would need to verify your assets and upload your request to the server, getting a small cut at the end. Nothing like a monetary incentive to keep humans honest, is there?

Then, there’s the need to keep as many people involved in the blockchain as possible, in order to make sure hacking the system is as hard as possible. Offer people money, and they flock in thousands. It is a very smart yet simple solution to what could have been a major issue in the blockchain.

Now that we have explained the blockchain in an appropriate depth and detail, it’s time to tackle the real question.

What Happens after Verification?
Mining is a complicated process. If you need a popular example of how it’s done, take the hacking system from the game Fallout 4, where a random word must be put into a computer to unlock it. Strange though it may seem, the mining system involves a humorously close parallel.

After receiving the request, the miner needs to verify whether the transaction about to be made is valid or not. She or he must go through the ledger and see if the numbers add up. For example, if Bruce has 10 dollars, and he wants to send 5 to his friend Lee, the miner will first see if Bruce has more than 5 dollars. Then the request is verified when the miners have seen that yes, Bruce has enough money to send to Lee. This prevents the double spending problem, where funds are not removed from an account after transferring them.

The next step, the one that resembles the aforementioned video game, is the encryption of the transaction. A random keyword is required to encrypt the data, (like activate a card, or Bitcoin debit card), and miners must guess randomly amongst hundreds of thousands of words until they hit the jackpot. However, they must do it as fast as possible or they may lose their reward, if another miner gets the job done first.

Most users will wait for about six refreshes of the blockchain before letting the transaction be passed on. This ensures that there is less than 0.1% risk of a hacker being able to uncover the data and steal it. Of course, in the above example, there’s no point of waiting sixty minutes to protect five dollars, but for large sums, the risk factor is much higher, so people wait longer.

Where Do Mining Farms Come into This?
Of course, this can’t be done by guessing keywords and crossing them out; this isn’t your newspaper’s crossword puzzle, after all. It is a rigorously difficult procedure, one so difficult and stressful that miners need a proper setup and space to do on a commercial scale. Which, incidentally, happens to be the topic.

A Mining Farm is a space, however big, where miners can set up their computing power and use it to compete better for a blockchain transaction reward.

At first, the computing needs of the blockchain were enough to be met by a single computer, but as popularity and traffic on the blockchain increased exponentially, so too did the computing needs, and thus today mining farms are required.

Mining farms can be a small room or a large space; they could be equipped with one P.C. or hundreds. The more the processing power, however, the higher the chances of success in each competition. So, a high-end mining farm might have a few hundred P.C.s with very high-end specs. The rate of confirmation is usually in Hashrate (hash/ second). The best mining farm in the world, located somewhere in Russia, has a known hash rate of about 38,570 hashes/second!

Mining Farms are quite difficult to set up. They have high initial costs, and profits can be severely cut back by the electricity bills as well as maintenance fees. A momentary power outage, for the smallest unit of time, may mean a system crash and a loss of capital. Moreover, the most successful farms need a large space, so the area costs also increase the startup cost, and the need for cooling and ventilation further increase the costs.

Overall, while mining farms are expensive to build, they provide a steady earning and can generate revenue constantly, while not needing any human resources, so they can be a very lucrative business in the long run.

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