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What is cryptocurrency mining?

It is impossible to print cryptocurrencies just like ordinary money. Their emission is called «mining», which in English means «extraction of minerals». The appearance of such a term was predictable. Digital coin mining requires the availability of powerful computing technology and is very resource demanding.

Briefly, the cryptocurrency mining is solving mathematical problems by computers united in a single network. Machines build chains of blocks that contain information about all transactions implemented since the appearance of the last link. In addition, it stores data about the previous block and a complex code that seals the link. Every created block provokes the creation of a new digital coin. Different cryptocurrencies use different algorithms:

  • bitcoin SHA-256;
  • litecoin scrypt;
  • monero cryptonight.

The algorithm gets complicated continuously. The more miners connect to the network, the more resources will be needed to create a new block.

You could mine Bitcoin with your desktop PC earlier without the need to leave your house. It is difficult to imagine such an ideal picture nowadays. A high level of interest in the «pioneer» of cryptocurrencies has brought work in the digital «mine» to a new level.

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You have probably noticed that it’s really hard to find the latest graphics cards in the market nowadays. This is due to the fact that the miners use them to acquire cryptocurrency. Companies that manufacture equipment for mining (ASIC), develop microchips that are designed for a certain cryptocurrency.

Types of mining

It is possible to mine coins in several ways. We will describe them all and find out which one is profitable, and which one is unpromising.

Solo mining. To start mining cryptocurrency independently, you need to purchase powerful computing equipment and install software. As of 2018 this way has completely exhausted itself. Many large pools have formed over the years of electronic cash existence, and their total capacity is tens of times higher than solo farms. Competition in this field has become almost impossible so we do not recommend you spending your funds purchasing the computers.

Mining in pools. Cryptocurrency pool is a so-called virtual «pool», to which farms and mining equipment are connected. The digital money mining is carried out together by all participants. Profit is divided equally among the miners. It should be noted that even the largest cloud mining services do it with pools with other corporations. This is due to the complexity of the algorithm.

Cloud mining. Experts believe that this way is the most effective and profitable one as of 2018. Its main advantage is that the miner is not obliged to purchase equipment, maintain it and pay huge electricity costs.

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Instead, the user rents the processing power of large data centers, concluding a contract for a certain period. Without any efforts, you are able to get profit. Cryptocurrency is automatically transferred to your digital wallet according to the agreed schedule.

A few more nuances

The cryptocurrency market is rather diverse. And this fact forms the conditions and parameters of mining. User gets a reward for every block collected. The miner is supposed to get 12.5 BTC for the creation of one block in the Bitcoin system. For the creation of one block in the Ethereum system the reward amount is 5 ETH.

The largest cryptocurrency emission is strictly limited in order to avoid inflation. For example, the last bitcoin will be created in 2140.

When choosing the way you want to mine, please make sure to properly estimate you financial capabilities. Think of how much time you can spend on this. It is also important to determine whether you want to earn a fortune, or get a small but stable income.