A year ago, a Texas-based Indian brother-sister duo came into the limelight for minting a lot of money in a short time. And you ask why is that newsworthy? Because they were merely 14 and 9 and made a fortune of around $30,000 per month! Yes, you read that right.
We’re pretty sure you’d like to know the details now. So, let us tell you all you should know about crypto mining because who knows you could make this kind of money one day.
What is Cryptocurrency Mining?
Diving down the cryptocurrency rabbit hole can be extremely overwhelming. But fortunately, you’ve got us by your side. So, let us share our two cents on what we’d do if we were you. And you can take it from there. Get it?
So, without further ado, let us get to what we do the best, simplifying things for you!
Checking and validating blockchain transactions is known as cryptocurrency mining or crypto mining. The work done by miners for coin mining requires intensive computational resources, but that is what keeps a blockchain network secure, so it’s worth the hustle. The cherry on the cake, honest and successful miners, are rewarded with freshly produced cryptocurrency and transaction fees. Also, crypto mining operations are responsible for introducing new coins into the existing circulating supply.
Now that you’ve officially passed the halfway mark of getting to know crypto-mining meaning let’s get to the fascinating bit after all this heavy lifting. Why does cryptocurrency need miners?
Essentially a metaphor, blockchain mining refers to the computational work that nodes in the vast, decentralised network of cryptocurrency do in the hopes of earning new tokens. In actuality, miners get paid for the work they undertake as auditors. They do the work of verifying the legitimacy of Bitcoin and other cryptocurrencies. Crypto mining helps to prevent the “double-spending problem” by confirming transactions.
For example, if A has 1 Bitcoin and A sends it to B and then tries sending that same Bitcoin to C, the network ensures that only one transaction will be accepted. It does this through the process of crypto mining.
How Does Cryptocurrency Mining Work?
Primarily there are three ways of getting cryptocurrency. You can either buy it on an exchange, receive it as payment for goods or services, or virtually mine it.
And because we don’t want to deviate you from the path of crypto mining, keeping all our focus there, let’s jump to it, using Bitcoin as our example.
Ever considered Bitcoin mining and making yourself a newsworthy fortune? A decade ago, anyone with a decent home computer could have participated and reaped benefits. But today, the blockchain has shown multitudinous growth, and the computational power required to maintain it has increased.
FYI: In October 2019, it required 12 trillion times more computing power to mine one bitcoin than when the first blocks were mined in January 2009!
So, you might not be able to take up bitcoin mining as a hobby unless you’re Richie Rich. Virtually all mining is now done by specialized companies or groups of people who band their resources together because you need a lot, believe us. But it’s always good to know how it works.
Mining Bitcoins is a lot like running a big data centre. Super powerful specialised computers perform the complex calculations needed to verify and record the new Bitcoin transactions. Verifying the blockchain requires a ton of computational power which miners voluntarily pool. And how do you profit? The value of the coins you earn by cryptocurrency mining should be higher than the cost to mine those coins.
Read More: What is Digital Currency?
- Crypto mining is the competitive process for a cryptocurrency that uses the proof-of-work (PoW) mechanism to verify and add new transactions to the blockchain.
- The miner that wins the tournament receives a portion of the cryptocurrency and transaction fees.
- In theory, anyone can become a miner. There’s no need for specific qualifications. Anyone with a basic understanding of technology can begin mining.
- However, crypto mining is extremely tough unless you invest in high-powered GPUs, which may cost anywhere from $500 to tens of thousands of dollars.
The Coin Miners’ Tools
Phew! We know that was a lot to take in, so now we’re coming to the part of crypto mining you’d be interested in. Let’s understand what you need to get started with crypto mining.
A bitcoin miner will first need to select and set the tools up. These include:
- Hardware GPU, SSD for crypto mining, or ASIC (application-specific integrated circuit)
- Mining software
- A wallet
- Preferred mining pool (if pool mining is chosen over solo mining)
Once all of these are in place, and the system is turned on, it begins mining automatically. Any other human involvement comes in the event of system or network failure, power outage, or regular system maintenance.
Coin mining hardware is the most significant component in the mining process. Over time, users have employed a variety of cryptocurrency mining devices. Cryptocurrency is generally mined using CPU mining, GPU mining, FPGA mining, and ASIC mining, either individually or as part of cloud mining.
Is Crypto Mining Worth It?
Cryptocurrency mining has grown in tandem with the crypto sector. So, the question is, if the world of crypto assets is so lucrative, then what stops the miners from taking the step and getting into mining?
The answer is that several elements determine if crypto mining is lucrative. Let’s take the case of Bitcoin. The cost of electricity to power the mining machinery, the availability and pricing of machines, and the complexity of mining are all factors to consider. The difficulty of a crypto validation transaction is measured in hashes per second. Because the network is structured to produce a particular number of bitcoins every 10 minutes, the hash rate reflects the rate at which the challenge is solved—the difficulty changes as additional miners join. As more miners enter the market, the difficulty rises to maintain the same number of bitcoins created.
Read More: Blockchain Wallets
The price of bitcoins compared to traditional hard currency is the final aspect in deciding profitability.
When a new block of Bitcoin transactions is validated, the coin mining process rewards Bitcoin miners in Bitcoin. Miners that successfully validate a block receive 6.25 bitcoins, now valued at over $260,000.
Role of 64-digit Hexadecimal Numbers
Noticed something cool?
The above number has 64 digits! So far, it’s been really simple to comprehend. And as you may have seen that number includes both numbers and letters from the alphabet. But what is the reason for this?
Let’s unpack the term ‘hexadecimal’ to see what these letters are doing in the middle of numbers.
As you may be aware, we employ the ‘decimal’ system based on base ten. As a result, each digit of a multi-digit number has ten possibilities, ranging from zero to nine.
‘Hexadecimal’, on the other hand, refers to the base 16 system, as ‘hex’ comes from the Greek word for six and ‘deca’ comes from the Greek word for ten. Each digit in the hexadecimal system has 16 possible values. However, our numerical system only provides ten different methods to express numbers (zero through nine). That is why you must insert letters, namely letters a, b, c, d, e, and f.
Also, a point to remember! You don’t need to calculate the total worth of that 64-digit number if you’re mining Bitcoin (the hash). So, what exactly are ‘64-digit hexadecimal numbers’, and how do they relate to crypto mining in general and Bitcoin mining specifically?
How Do I Start Mining Crypto Currency?
After understanding what is crypto mining, you want to know about the best cryptocurrency to mine and get in that pool of money you’ve been dreaming about. Yes? But let’s be real.
Crypto mining can be super expensive and consumes a ton of energy – but some people find all the hassle worth it. So, if you’re one of many aspiring crypto millionaires, we’ll tell you how to get started.
Get a high-performance computer first. Then, create a wallet for popular cryptocurrencies such as Bitcoin and join a mining pool to accelerate profitability. These pools are groups of miners who pool their resources to increase their mining power. The earnings made from mining are subsequently shared equitably among the pool’s participants. As a result, mining pools enable individuals to collaborate more efficiently.
Mining has exploded in India in recent years, with companies like Easyfi Network offering mining services and blockchain development. However, mining in India is both costly and unprofitable. Successful coin mining necessitates high-performance computers, which consumes a lot of power and raises your electricity bill. According to the Cambridge Bitcoin Power Consumption Index, the cost of electricity in India ranges between Rs 5 per unit on average, and bitcoin mining consumes roughly 67.29 terawatt-hours per year.
Not all types of equipment are available in India. So, they must be imported from countries such as China, resulting in increased costs and profit decreases.
Why do Cryptocurrencies Need to be Mined?
These cryptocurrencies are basically digital records, and they can be copied and counterfeited, and there is a risk of them being resold again is always there. By mining the cryptocurrency, it can be made resource-extensive and expensive. Mining also makes the cryptos come under circulation.
Why is Mining Important?
To generate new coins, mining is important. This is how new cryptocurrencies are generated and come into circulation, as mentioned above. Mining includes decentralized computer networks t verify the blockchains and document the crypto transactions.
What are Mining Pools, and Why are They Required?
A mining pool is basically a joint group of crypto miners combining their computer and network resources over the network to provide strength to finding or making a currency profitable. They are also required to mine new currency successfully.
Downside of Mining
The downside of mining is that it utilizes extensive electricity to run computers to mine a cryptocurrency. Other downsides are-
- Scripting on cross-sites
- Hack attacks
- Mining is extremely costly
- Reduces lifespan of graphic cards
- Volatile market conditions
How does Mining Confirm Transactions?
The miners confirm a transaction after the miner solves the cryptographic puzzles. In bitcoin, there is a proof-of-work to reduce the chances of cyber attack. Once the puzzle is solved, the crypto is confirmed and added to the blockchain. A new blockchain confirms one transaction.
Why does Mining Use So Much Electricity?
Mining uses so much electricity because of the decentralized structure of the bitcoin, which generates a huge carbon footprint. Another point is that to verify any mining transaction, miners have to solve complex math problems or a crypto puzzle, as proof of work. There are a lot of miners who are trying to solve a puzzle to receive the reward, but it consumes a huge amount of electricity.
As you may have inferred from this article, determining the best crypto to mine in 2022 is tough since it is subjective.
For some, the best coin is the most profitable cryptocurrency to mine, while for others, the simplest cryptocurrency to mine is the one to choose. It is entirely based on your resources, hardware, the amount of time you want to devote to it, your preferred method of working, and your technological knowledge. It also depends on where you live and how much power you have.
While Ethereum and Bitcoin continue to dominate the profitability in the crypto mining game, they are not that suitable for most people, especially amateurs.
Also, if you are a miner with GPU hardware, flocking to the bigger altcoins like ravencoin, monaco, vertcoin, etc., might be a good bet for you. Also, CPU mining, FPGA mining, and ASIC mining, either individually or as part of cloud mining, would present other opportunities, so it’s all based on your preferences and objectives.
Now that you are aware of crypto mining’s meaning and the best crypto to mine, let’s venture ahead to build that crypto empire you’ve dreamed about.
Because crypto mining consumes a lot of resources, it might tax your GPU or other mining hardware. GPUs have been known to blow up, and mining rigs have been known to catch fire due to the extensive loads.
No. Cryptocurrency mining today requires vast amounts of computing power and electricity to be profitable and competitive. Running a miner on a mobile device, even if it is part of a mining pool, will likely result in no earnings and unnecessary load on your device.
The mining process achieves a decentralised consensus through the concept of proof of work (PoW).
Your earnings through cryptocurrency mining can be withdrawn to your wallet. You can choose a crypto wallet. Some of the popular ones are:
There are several cryptocurrency mining software that keep running in the background and solving mathematical problems while you focus on your work. Some famous free software that you can use to get started are:
– Cudo Miner
Some countries have given legal status to cryptocurrency mining, whereas some countries have still not declared crypto mining a legal activity.
To keep it safe, you need crypto mining software, hardware, hash rate, PC, Application Specific, Integrated Circuit, and a cryptocurrency wallet.
Crypto mining is extremely profitable even in 2022. Miners are making more than $20 million per day.