Mining Contract

What Is A Mining Contract?

A mining contract is an agreement between crypto miners and data centers on cryptocurrency mining. Crypto miners are those actively involved in securing blockchain networks; they need expensive gadget energy. Investors supply the hardware and energy required for crypto mining to crypto miners under the agreement that covers how generated coins are shared.

Crypto mining is central to cryptocurrency, and without it, there would be no currency. Crypto mining is the process of solving cryptographic equations with the resultant effect of creating new coins.

With the demand and use of cryptocurrency spreading like wildfire as more people are on board, vast corporations are adopting this technology. Crypto mining has also seen an increase; the increase is needed to match the level of crypto transaction volume taking place day by day.

Deeper Definition

Crypto mining is a costly process in terms of materials needed. The process involves the use of GPUs, which are very much expensive rather than cheaper CPUs. GPUs also consume more power than CPUs. For example, 3GPU can consume around 1KW of electricity. This is huge because thousands of these GPUs would be needed, which would mean that excessive of amounts energy would be used in the process. Due to this being a very expensive process, crypto miners would need to partner with investors who can afford to supply the required quantity of GPUs and who can also cover the cost of energy generation.

It is similar to a raw mineral mining contract between investors and the government. In this case, data centers provide all that is needed to mine crypto tokens or coins. They will cover the cost of energy consumption from the mining center and the GPUs. They may pay upfront to the money or company to get back profits from the mining process.

Mining Contract Example

To make the cryptocurrency mining process effective, a pact can be agreed upon between cryptocurrency miners and data centers. This agreement is called a mining contract.

John decided to set up a cryptocurrency mining operation. He found that it would be easier to rent the processing power of a large data center based in Norway. John and the data center came to an agreement on how the mined tokens would be split.