Over the past few years, cryptocurrencies like bitcoin have been growing in popularity, with an ever larger number of people buying and selling bitcoins. Now that crypto industry has reached the mainstream, many are looking to get into cryptocurrency game.
If you had started mining bitcoin back in 2009, You could have earned thousands of bitcoin by now. Yes, You have come at the right time. still, you can mine and earn bitcoins.
In this evolving technological world, Bitcoin acts as gold. Like gold, Bitcoin cannot simply be created arbitrarily. It is mined out of the ground, and even Bitcoin needs mining via digital means.
So let’s begin with what is cryptocurrency mining and how does bitcoin mining work in greater details.
What is Cryptocurrency Mining?
Cryptocurrency mining or crypto mining is a process in which transaction for various form of cryptocurrencies are verified and added to the digital ledger. You can also call it as altcoin mining or cryptocurrency mining.
Crypto Mining Types
- Cloud Mining: Here, you pay someone a specific amount of money and rent their mining machine called a rig. This rent lasts for an agreed period of time, through which all of the earnings that the rig makes are transferred to your cryptocurrency wallet.
- CPU Mining: CPU mining make use of processors to mine cryptocurrencies. It used to be a viable option back in the day. But currently, fewer people use this method on a daily basis.
- GPU Mining: Here, GPU rigs utilize graphics cards to mine cryptocurrencies. One standard rig is made out of a processor, a motherboard, cooling, rig frame, and a few graphics cards.
- ASIC Mining: Application-Specific Integrated Circuits are special devices that are designed explicitly to perform a single task. Specially, in this case it is crypto mining.
Cryptocurrency Mining Requirements
Cryptocurrency mining is a great hobby. It provides an easy way to earn bitcoin instead of buying several coins and start trading.
In order to start mining it needs some tools and equipment, below are the necessary tools for mining.
Reliable Internet: Since the verification requires the real-time authentication machines, Budding miners should invest in stable internet connection. This allows them to connect instantly, else with an unstable internet connection could end up repeating the process.
Cooling System: To prevent the desktop safe from external problems due to lots of heat, use cooling systems. Such as a fan, air conditioner to keep the environment cool.
(GPU) Graphics processing unit chip: This is the most crucial component of the mining process, and the most expensive. If you want to champion in mining, you have to first consider getting the best possible GPU for mining.
RAM: RAM should be at least 1 GB or 1 Gigabyte for actual mining.
Membership in online mining pool: This is in connection with other miners who are experts in mining. You can also discuss the mining process. It also provides the chance to seek new opportunities to learn.
Mining software package:It allows you to mine using a pool as well as it supports Bitcoin or cryptocurrency ASIC miners. The most updated area of the software is its control on the hardware. It lets you change numerous settings in the ASIC or FPGA machine such as voltages and other features.
Coin wallet:It is like a private database that allows miners to store their earnings.
How Does Cryptocurrency Mining Work?
Now, when you have basic knowledge about mining let’s dive in with the actual working.
Here are a few steps to understand the mining process.
- When the transaction made over the blockchain. (for example, when one particular user send the coins to another user), this transaction data will be recorded on the block.
- Further, these blocks need security and encryption information, this process will be done by crypto miners on the network.
- To encrypt these blocks, crypto miners must solve the complicated mathematical problems with the help of cryptographic hash functions that are linked with a block containing the traction data.
- Once the miner secures the block, This block is added to the blockchain and verified by other nodes on the network, this process called consensus.
- Once the cryptocurrency miner verifies and secures the block, the miner is rewarded for enabling and performing a transaction with a newly created coin. This reward for work is known as POW or proof of work.
How To Choose A Mining Pool?
If you have decided to try crypto mining, even if you don’t have powerful equipment, one of the decisions you need to make is which mining pool(s) to join. Here are some tips for choosing which pool to join in order to maximize your earnings.
- Payout structure of preference: A pool can payout rewards to its miners based on a Pay-Per-Share or Pay-Per-Last-N-Shares basis, two methods with their own costs and benefits.
- Team trustworthiness and pool reliability: with the insufficient governance in the crypto space, and unsafe practices by service providers, the danger increases. Thus, choosing service providers development teams is important.
- Extra features: Quality pools provides enhanced UX and UI design, supply users with functionality that allows them to analyze their performance.
- Fee: Normally, service fees range between 1–3% and exist to pay for the pool’s operating expenses and the interface functionality provided to users.
Is It Worth It to Mine Cryptocoins?
As a hobby, yes! crypto coin mining can generate a small income of a dollar or two per day. In particular, the digital currencies mentioned above are very accessible for regular people to mine, and a person can recoup $1000 in hardware costs in about 18-24 months.
However, as a second income, no, crypto coin mining is not a reliable way to earn substantial money for many people. The profit from mining crypto coins only becomes significant when someone is willing to invest up to $3000-$5000 in up-front hardware costs, at the time you could potentially earn $50 per day or more.
Pros And Cons Of Cryptocurrency Mining
- It provides an opportunity to understand the concept and functionalities of the crypto-coin and blockchain technology.
- Crypto mining is most cost-effective when compared to buying multiple coins.
- Miners play a crucial role in assuring the coin’s legitimacy.
- One doesn’t need a technical expert or business to start a hobby in mining.
- It cuts out the middleman and ensures that crypto coin keeps it in a decentralized nature
On the other hand, crypto mining also has a few downsides, some of them are:
- Expensive investments – The demand for the graphics processing unit or GPU has contributed to the massive price increase in Cryptocurrency mining.
- Miners make less income compared to investors – the reason why mining should be seen as a hobby instead of a passive income job is due to miners don’t get paid a lot. Aside from earning crypto coins, most people who want to earn huge profit may consider investing instead.
- Potential fraudulent activity – Investors and miners who download questionable software may fall victim to potential scams and frauds that would put their security at risk.
Hope you like the read! Stay tuned for more detailed guide on various other cryptocurrency topics.