A Beginners Guide To Cryptocurrency Mining 0/0
Lesson 1: Introduction to cryptocurrency mining
When you hear the term Mining; What comes to your mind at first will be a kind of stuff that has to do with digging the ground to get precious metals like gold. Yes, you won’t be wrong if you think so because that process is also called mining.
But in the digital world there exist a certain technique that requires working with your computer or other higher processing machine to help in solving some mathematical problem created on the blockchain technology due to transaction of digital currencies. That is what we call digital mining.
So you’re interested in learning how cryptocurrency mining works and possibly get involved to make profit? Well, Congratulations! You’re in the right place. By following our guide, you’ll learn everything you need to know about cryptocurrency mining. I expect you already know what cryptocurrency is and how it works.
What Is Cryptocurrency mining
Mining is the process of adding transaction records to any cryptocurrency public ledger of past transactions. This ledger of past transactions is called the blockchain as it is a chain of blocks. The blockchain helps to confirm transactions to the rest of the network as having taken place.
How does cryptocurrency Mining works
Cryptocurrency is designed to run on a blockchainb technology, which is a shared ledger or document duplicated several times across a network of computers. The updated document is distributed and made available to all holders of the cryptocurrency.
Every single transaction made and the ownership of every single cryptocurrency in circulation is recorded in the blockchain. The blockchain is run by miners, who use powerful computers that tally the transactions. Their function is to update each time a transaction is made and also ensure the authenticity of information, thereby ascertaining that each transaction is secure and is processed properly and safely.
As payment for their services, miners are paid physically minted cryptocurrency as fees by vendors or merchants of each transaction.
Cryptocurrency miners use dedicated software on their computers to process transactions. The more sophisticated/powerful a miner’s computer is, the more transactions they can process and the more coins they earn as a reward for their efforts.
Mining rewards consist of the small fees charged to the person who initiated the transaction (for example, a person buying a coffee using bitcoin from his blockchain wallet with his smart phone will pay a small amount of bitcoin as transaction fees that goes to miners ).
Occasionally the cryptocurrency that’s being mined, its blockchain will release new coin during the mining process and this is divided up amongst the miners that made the transaction possible.
Types of mining
Before one goes into the mining business, there are various types of mining today he should know about. This will help you make an informed decision based on your investment capacity.
Let’s examine the type of mining we have today.
Solo Mining might seem like a great idea because here rewards are not shared with any other miner. You just turn your computer on and let the money roll in, right? Wrong. When you’re mining alone, you are competing with other people and will only get rewards if you solve the math puzzle first. Since you’re competing with a very large network of people and companies that have a lot of resources, you would need to get very lucky very often. Mining alone is only profitable if you have a lot of resources at your disposal to fund the cost of buying high power mining equipment.
With increasing generation difficulty, mining with lower-performance devices can take a very long time before block generation, on average. For example, with a mining speed of 1000 Khps, at a difficulty of 14484 (which was in effect at the end of December, 2010), the average time to generate a block is almost 2 years.
Pool mining is the easiest and fastest way to get started with mining. Joining a pool of miners is kind of like buying lottery tickets with a group of friends and agreeing to split the prize money amongst yourselves if one of you wins. You have a greater chance of winning a little bit of money more often this way than simply buying one ticket by yourself and hoping to get the grand prize once.
As more and more miners competed for the limited supply of blocks, individuals found that they were working for months without finding a block and receiving any reward for their mining efforts. This made mining something of a gamble. To address the variance in their income miners started organizing themselves into pools so that they could share rewards more evenly
Pool mining allows you to work together with other people interested in mining. In a pool mining all participants that are mining within that single pool agree that if one of them find the cracks the block in form of mathematical equations that allows them to earn reward, they’ll share rewards with everyone. How often you find blocks and share rewards depends on the pool size. However, not all pools are the same. These are the things that you should consider before joining a pool.
Some Major pool miners includes: Bitfury, BTC Guild, BW Eligius, F2Pool, P2Pool, Slush’s pool ,Tangpool
Cloud mining is when you are actually mining cryptocurrency without getting involved in the day to day mining operation or the hardware used in the mining operation. It equivalent to paying someone to mine for you. Here you are meant to connect to a remote data center with shared processing power. The mining rigs are housed and maintained in a facility owned by mining company and the you simply needs to register and purchase mining contracts or shares. Since Cloud Mining is provided as a service there is generally some cost and this can result in lower returns for the miner.
Early Bitcoin client versions allowed users to use their CPUs (majorly computers) to mine. The advent of GPU mining made CPU mining financially unwise as the hashrate of the network grew to such a degree that the amount of bitcoins produced by CPU mining became lower than the cost of power to operate a CPU. The option was therefore removed from the core Bitcoin client’s user interface.
GPU Mining is drastically faster and more efficient than CPU mining. See the main article: Why a GPU mines faster than a CPU. A variety of popular mining rigs have been documented.
FPGA mining is a very efficient and fast way to mine, comparable to GPU mining and drastically outperforming CPU mining. FPGAs typically consume very small amounts of power with relatively high hash ratings, making them more viable and efficient than GPU mining. See Mining Hardware Comparison for FPGA hardware specifications and statistics.
An application-specific integrated circuit, or ASIC, is a microchip designed and manufactured for a very specific purpose. ASICs designed for Bitcoin mining were first released in 2013. For the amount of power they consume, they are vastly faster than all previous technologies and already have made GPU mining financially.
Which type Of cryptocurrency is mineable.
There are a good number of cryptocurrency that are mineable, some of the most popurlar cryptocurrencies includes;
In short, any coin that Uses the proof of work (POW) Mechanism is mineable.