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What is crypto mining? 

Bitcoin miners cumulatively generated $21.8 million in revenues on August 11. Yes, that’s the amount generated in a single day! Before you begin looking at Ferrari models to buy, it’s important to know that miners from around the world compete for every bit of cryptos mined and not everyone who mines is rewarded. However, if this piques your interest, let’s try and understand what crypto mining really is and how it works.  

The simplest way to understand crypto mining 

Crypto mining is the process of generating cryptocurrencies. This way of creating new digital coins involves you competing with other miners to solve complex puzzles and validate cryptocurrency transactions by adding them to the distributed ledger of the related blockchain. There are three aspects of the process that need attention. Firstly, crypto mining requires you to have a computer with very high processing power. Secondly, you will be in a race with other crypto miners to solve the next block on the blockchain. The person who wins this race is rewarded with the coin being generated. Thirdly, only verified crypto miners are allowed to mine and verify the transactions. To ensure this, a proof-to-work (PoW) consensus mechanism is established, which also ensures that the blockchain is safe from outside attackers. 

 

The process of crypto mining forms the heart of the blockchain universe, as the coins provide an incentive to miners to maintain and secure the distributed ledger. Mining has been made extremely resource-intensive to prevent counterfeiting or double-spending of coins. 

 

Did you know? 

As of August 2022, the reward for mining one block on the bitcoin network was 6.25 BTC. This means a miner could earn $153,181.25 (6.25 BTC x $24,509) for completing a block.  

 

What you need to begin crypto mining 

To begin the process of crypto mining, you will need hardware and software.  

 

Crypto mining hardware 

During the early days of cryptocurrency mining, the process was possible with a standard computer, much like the ones people have in their homes. With the growing popularity of cryptocurrencies, the complexity of mining has increased, along with the need for computational power.  

 

Crypto mining now requires the use of high-powered, specialised computers that can crack very complex mathematical codes to solve puzzles. These specialised computers are also known as nodes or mining rigs.  

 

Some people come together to pool in their cryptocurrency mining hardware, combining the processing power of all their computers to increase their chances of solving the puzzles. The reward received is distributed among them, according to each individual’s contribution to the pool. Others decide to use very powerful computers, rather than join a pool. While this reduces the chances of solving puzzles, you don’t need to split the reward with anyone. 

 

Did you know? 

The term “hashrate” is a measure of computational power per second used in crypto mining. The performance per second is measured in billions, trillions, quadrillions, and quintillions. 

 

Cryptocurrency mining software 

Cryptocurrency mining software can run on an individual computer or connect a pool of computers working together. Some of the most popular cryptocurrency mining software are: 

 

ECOS: Established in 2017, ECOS is the first cloud mining provider to achieve legal status. It is highly transparent and has more than 100,000 users from across the globe. ECOS can be used on Windows, Mac, and Linux machines. 

 

CryptoTab: This is the world’s first browser offering mining features, which means the process of mining can continue to run in the background while users continue to use their device to watch videos, play videogames or chat with friends. Being browser-based, CryptoTab can be used on personal computers or smartphones. While this software is available for both Android and iOS, the most popular cryptos require too much computational power to be mined on smartphones. 

 

CryptoTab Farm: This is a version of CryptoTab that facilitates pool mining. 

 

Awesome Miner: This cryptocurrency mining software facilitates centralised management of mining activity, allowing you to use different devices and track their mining performance from a single dashboard. Even while you’re away from the devices, you can check their mining hashrate, the temperature of each of them, and the overall earnings. 

 

EasyMiner: This software is preferred by beginners because, as the name suggests, it allows a very simple start to cryptocurrency mining. It displays the crypto mining workflows graphically, making it easy to change network settings, track the mining of different cryptocurrencies and switch mining pools. 

 

CGMiner: This is an open-source cryptocurrency mining software that is preferred by experienced miners, as it allows you to work with a variety of hardware options. Since it runs on a command-line interface, rather than a graphical interface, it is not an easy option for beginners.  

 

Some of the other popular cryptocurrency mining software are Bitdeer, Hashmart, Shamining, BetterHash, NiceHash, Cudo Miner, Hashing24, Kryptex and Pionex. Many of these are completely free or offer basic features for free.  

 

Top tip 

When calculating the cost of crypto mining, do include electricity costs, as mining consumes a lot of energy. Miners of bitcoin, the world’s largest cryptocurrency, are estimated to consume around 130 TWh (terawatt-hours) of electricity annually, roughly 0.6% of global electricity consumption, according to the University of Cambridge’s bitcoin electricity consumption index. 

 

Crypto wallet

Before you begin crypto mining, you’ll need to sign up for a crypto wallet, which is required for storing and exchanging the cryptocurrencies you generate. You can choose between “hot” and “cold” wallets. A hot wallet is connected to the internet, making it faster in performance.

 

Crypto mining methods

There are several ways of mining cryptocurrencies. The most popular of these are:

 

GPU Mining

This involves the use of an advanced GPU (graphics processing unit), also known as a graphic card, a motherboard, a cooling system and a stable internet connection.

 

ASIC Mining

It’s possible to mine cryptos using an application-specific integrated circuit (ASIC), which provides more mining power but is also quite expensive.

 

CPU Mining

This is the easiest way of mining cryptos, as it uses a computer’s central processing unit (CPU). The drawback is that you cannot hope to mine the most popular cryptos (like bitcoin and Ether) with this method, as it does not provide enough computational power.

Cloud mining

This method involves hiring a company to mine cryptos on your behalf, where the company uses its systems and mining devices. Cloud mining has gained popularity because it is less expensive than GPU and ASIC mining.

The most established and higher-priced cryptos are more difficult or expensive to generate than lower-priced ones. You’ll need to weigh the cost of everything you need plus your time against the price of the coin you’re about to generate to make the decision.

 

Learn the terms

Mining rig: The arrangement of hardware systems needed for cryptocurrency mining.

Nodes:  The communication point or bridge that connects cryptos to their respective blockchain.

Proof of work: It is a decentralised consensus mechanism where members of the network are required to solve puzzles, thereby preventing frivolous or malicious use of computing power.

Hashrate: It measures the computational power needed for crypto mining, which can also be thought of as the speed at which the mining rig operates.

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