Everything You Should Know about Cryptocurrency Mining

Everything You Should Know about Cryptocurrency Mining

Over the past few months, crypto market capitalization has multiplied and the prices of many cryptocurrencies have reached new highs. As a result, more and more people started considering mining as an option to benefit from this rally.

This hype has already caused a shortage of video cards in many countries. Miners even buy laptops in batches to start making money on cryptocurrency.

But what is mining and what is needed for it? Only video cards or laptops? Let’s try to figure this out.

Understanding Mining

Simply put, mining is a process where a machine performs certain tasks to receive cryptocurrency as a reward for its work. This mining concept is also known as the Proof of Work algorithm.

But what are these tasks? Basically, it is solving mathematical equations and scenarios. The miner’s equipment is trying to solve a math problem and find an answer that must be in a certain range.

If the miner finds the answer, then a new block will be created and added to the blockchain.

A reward for finding a block is a small amount of newly created coins and fees for transactions that the miner decided to add to their block. Then the process is repeated — miners start looking for a new block and add new transactions.

Cryptocurrency Mining

There is high competition between miners. The more computing power a miner has, the more chances that their hardware will be able to find the necessary solution and receive a reward.

For the same purpose, a lot of miners are united in so-called pools. In mining pools, the reward is distributed among all participants, depending on their contribution to the process of solving the problem.

Not all coins are available for mining, as not all use the Proof of Work algorithm for consensus. Coins that support mining may have different hashing algorithms and mining difficulty.

Therefore, it is necessary to select the appropriate equipment for the efficient mining of a certain coin.

What are the Mining Methods?

There are several main mining methods — CPU, GPU, ASIC, and cloud mining. Briefly about each of them.

CPU mining involves using PC processors. In the early days of crypto, this was a fairly popular mining method, but now it has practically outlived itself due to its extremely low efficiency. The CPU method has been replaced by GPU mining.

Miners predominantly use GPU for mining because of its efficiency in the context of hash speed and rig price. Most often, GPU miners use several video cards for mining at once and create so-called mining farms.

ASIC is a piece of hardware that is specifically designed for crypto mining. ASICs are much more efficient than GPUs and CPUs, but they are also the most expensive.

There is some negative attitude towards ASIC miners in networks dominated by GPU miners because ASICs can introduce an imbalance in the network.

That is why some coins cannot be mined with ASICs. At the same time, ASIC is the only effective option in networks where there are an extremely high mining difficulty and hash rate, for example, in the bitcoin network.

All the above-mentioned mining methods imply that miners will buy and deploy mining equipment on their own. But there is a way that allows miners to borrow computing power — cloud mining. With cloud mining, miners rent equipment for a certain period and pay another company for it.

All mining earnings (minus the electricity and maintenance costs) are credited to the miner’s wallet.

Cloud mining can be suitable for those who do not want to dive into the hardware-related part of mining and want to use ready-made equipment. However, it is important to double-check how reliable the cloud mining company is.

What do you Need to Start Mining?

First of all, you need to decide what mining equipment to use. It must be prepared in advance by installing the necessary mining software for a specific coin. In addition, the software helps miners track important parameters such as hardware

hashrate, temperature, fan speed, average hashrate in the particular cryptocurrency network, etc.

Also, miners have to select the cryptocurrency wallet for receiving mining rewards. If you need to exchange the mined coins for another cryptocurrency or fiat, for example, convert LTC to BTC, then you should also think about searching for a crypto exchange.

If you are not going to mine crypto on a large production scale, then it is worth considering joining a pool where miners receive a reward depending on their contribution. Otherwise, you will compete with other miners and pools alone, which may be ineffective in some cryptocurrency networks.

Besides, miners should take care of the space for storing mining rigs. Mining farm consumes a lot of electricity and can make a lot of heat and noise. Therefore, in the case of large farms, miners might need fans and other cooling equipment as well.

Cryptocurrency Mining

And last but not least is knowledge. If you want to become a miner, you need to figure out how to set up the necessary equipment and calculate what coin to mine depending on the equipment and electricity costs.

Also, to stay an effective miner, it is important to constantly monitor cryptocurrency prices and mining difficulty to find the most optimal way for earning crypto.

Mining is a very flexible process where everyone can find a suitable path. The answer to the question of what to mine depends only on the miner’s ambitions and capabilities.

The cryptocurrency market is diverse enough for efficient mining both for small miners with a few video cards and large players with industrial capacities. The main thing is to study the issue in advance and assess your capabilities.

Published at Sat, 20 Mar 2021 16:42:50 +0000

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