Mining Algorithm
A mining algorithm is a computer program used to verify transactions on a distributed ledger and create new blocks of data on the chain. The mining algorithm is an essential part of the process that enables decentralized networks, such as cryptocurrencies, to function securely without relying on third-party intermediaries.
Most modern crypto networks use one or more consensus algorithms, which are based off Proof-of-Work (PoW) principles. PoW involves miners competing against each other in order to solve complex mathematical puzzles in order to be rewarded with cryptocurrency tokens for their efforts. In this way, miners provide the computational power needed by the network to validate transactions and create new blocks of data – otherwise known as ‘mining’.
The most widely used PoW algorithms include Bitcoin’s SHA256, Ethereum’s Ethash and Litecoin’s Scrypt; however there are many others including X11 , Equihash, NeoScrypt etc.. Each algorithm requires different hardware specifications and levels of energy consumption due its individual set difficulty level for solving mathematical problems. As such understanding which algorithm best suits your needs should be an important factor when considering investing into cryptocurrency mining activities .
