Everything You Need To Know About Cryptocurrency Mining
Cryptocurrency is one of the hottest topics on the internet these days. The huge gains in 2017 were as noteworthy as the losses that came in 2018. While most people are buying cryptocurrencies to get into this space as investors, some people are setting up mining farms in order to mine cryptocurrencies.
In this article, we will explore cryptocurrency mining and the process of setting up your own mining rig.
What is Cryptocurrency Mining?
Cryptocurrency mining isn't the same as mining for the mineral. While mining for minerals is labor intensive, cryptocurrency mining is power intensive. However, both of these mining techniques are performed to bring new assets into circulation.
Since cryptocurrency is not regulated and maintained by any centralized authority, there was no way to stop double spends from happening. In other words, it was impossible to know if a person distributed more money than he actually had. This was a problem until Satoshi Nakamoto conceptualized cryptocurrency mining. In this process, a complex mathematical problem is solved to verify each and every transaction on the network. Once this is done, a ‘hash value’, like a social security number, which is unique to each transaction, is assigned to this transaction and stored on the blockchain. Since no two transactions can have the same hash value, the problem of double spend is averted.
Has the difficulty of Mining increased over time?
The process of mining is done by crypto miners. They use their graphics processing units (GPUs), and their application-specific integrated circuits (ASICs) mining rigs to do this. When Bitcoin was initially introduced, the number of miners were very low and mining was easy. As time passed more people joined the network and mining became more difficult.
What is a Block?
Every cryptocurrency network has a pool which accumulates all the transactions on the network. Miners then put a number of transactions into blocks in order to verify the transactions in a block. The miner with the highest hash-rate would be more likely to find a block very often. Only the miner who finds the block is rewarded with Bitcoin. Once a block is found, all the transactions on it are verified and stored on the blockchain.
What is a Mining Reward?
Miners help to secure the cryptocurrency network. Hence, to value their work they are rewarded with a certain amount of cryptocurrency for each block that they solve. Additionally, each transaction also carries certain miner fees which go to the miners. Mining is the only way to add more coins into circulation. The mining reward is what keeps miners motivated to do their job.
Is Mining Profitable? [Link to the other article here]
Mining is computationally intensive. This puts a huge load on the GPUs. In order to mine successfully, you must have a very powerful GPU or a dedicated ASIC miner, and these rigs are very expensive. On top of that, you will also need to pay electricity charges. Additionally, solo mining is no longer an option. You would need to produce a considerable amount of hash power in order to be able to find a single block. Hence, people usually mine in pools or groups. This again incurs pool charges. Considering this, cryptocurrency mining is profitable if the cost of electricity in your country is cheap. However, you would still need to pay upfront in order to buy and build a mining rig. There are some altcoins that can yield a net profit of a few hundreds dollars per month, per rig. Bitcoin is not one of those coins. Mining Bitcoin is no longer cost effective, in most parts of the world, to most beginners, whereas altcoin mining can be profitable.
Cryptocurrency mining is a wonderful way to make some extra money. The process of setting up the software required for mining is very simple. The process of mining is computationally intensive and also generates a lot of noise because of the coolers that are needed to keep the system functioning. In order to be a successful miner a very efficient mining rig is required, and sometimes the electricity costs in your location can be cost prohibitive. If power costs in your area are low, and you are ready to invest in a good GPU or ASIC miner then cryptocurrency and alt-coin mining can be a fun hobby to make some extra cash. Just don’t mine Bitcoin. That gold rush is over!