What is cryptocurrency mining?
Next year marks the anniversary of the mining craze that has almost entirely taken over the planet. The unprecedented spike of Nvidia and AMD prices, which resulted almost in a critical deficit due to the overwhelming demand for this particular type of equipment, presents a shining example of an extraordinary interest in this source of income from professional investors and crypto enthusiasts alike.
Considering that during the year before last all media outlets were referring to crypto only in a negative context, calling them the «next Ponzi scheme», there has been a radical shift, and now they describe the blockchain-based digital currency as one of the most lucrative forms of investment. Nowadays, the real agenda is the profitability of mining.
In case you have just woken up from the cryogenic sleep and can’t wrap your head around any of the above-written stuff, then consider reading this article which may help you to grasp the basics of cryptocurrency-making, namely mining.
What is mining cryptocurrency on miners?
Unlike the real-life mining industry, cryptocurrency mining doesn’t require you to use a sledgehammer of a dynamite. Instead, you will have to deal with graphics cards or a specific equipment called ASIC. To put it simply, mining constitutes in getting rewarded in the form of digital assets (coins, tokens, currencies) for performing complex algorithmic computations by the virtues of special devices or for confirming transactions within the network.
The required equipment
Let’s get into details about the actual mining process. In order to carry out this particular process of acquisition of digital money, one will have to use a very specific equipment called ASIC (Application Specific Integrated Circuit). It contains an integrated circuit capable of performing highly-complex algorithmic computations. The process of decryption of crypto mining algorithms serves as a driving force of all blockchain-based networks. The most popular algorithms, as of this year:
- SHA-256 (Bitcoin and Bitcoin Cash mining);
- Ethash (Ethereum and Ethereum Classic);
- Scrypt (Litecoin);
- Equihash (Zcash, one of the most easily-mined cryptocurrencies among top-ranked ones).
Nvidia GeForce (1050 and higher) and AMD Radeon graphics cards come as an alternative to ASIC mining. It should be noted that efficient mining, which provides a stable stream of income instead of being a hobby that generates a few bucks here and there, requires simultaneous use of several graphics cards, assembled in the so-called rig that conducts the non-stop mining. It must also be equipped with a high-performing cooling system since the running rig tends to generate plenty of heat which may lead to overheating.
A few years ago, the CPU (computer processor) mining was also a viable option, but it is no longer of relevance due to the rapid increase of mining complexity which occurs before the total number of coins in circulation reaches the designated issuance ceiling or with the increase of time required to form a block within the network.
Step-by-step guide to starting crypto mining
So, how does one start mining cryptocurrencies? First things first, it is necessary to determine the method of mining that is the most suitable under the present circumstances. This requires figuring out which crypto coins will bring the largest profit within the given period of time which you can do using numerous online mining profitability calculators of which we have given a detailed explanation here (link). In any case, you would have to choose from coinmarketcap’s top 20 cryptocurrencies with regard to their capitalization.
A few words about the benefits and the drawbacks of ASIC and GPU mining:
Pros: relatively easy equipment setting, high profitability of mining.
Cons: noisiness, problematic repair in case of equipment failure, expensiveness.
Pros: quiet work, a long-term guarantee of service, a reasonable price.
Cons: a deficit of efficient graphics card on the current market, lower mining profitability.
When calculating mining profitability one should take into account when the price of electricity that will be consumed in the process (it can cost you a hefty sum), as well as the price of a cooling system, rent (in case you consider assembling a decent rig), and the Internet bills.
After that, it will be necessary to choose a mining pool which is a unification of a large number of miners organized to facilitate the block formation and accelerate the process of reward obtainment. Dwarfpool.com, nanopool.org, coinme.pl., are ranked among the top mining pools. The mined cryptocurrency is distributed among all members of the pool proportionally to the contribution which each miner made into the process of block formation.
Choose the storage for the acquired cryptocurrency. This requires getting a multi-currency crypto wallet which can be downloaded either on a computer or on a mobile phone (Jaxx, Exodus, Coinomi), as well as the so-called «cold» offline wallet, such as Ledger. If you think about selling the mined cryptocurrency, in other words, engage in crypto trading, it would be advisable to create an account on a popular crypto exchange (Poloniex, Binance, Bitfinex).
Lastly, install a mining software on a computer from which you will administer the rig, or set your ASIC to the desired mining algorithm, and just press «Start Mining».
That’s all folks, now you know what’s the essence of cryptocurrency mining.