What You Need to Know About Mining Cryptocurrency
Ever since the introduction of Bitcoin in 2009, cryptocurrency became familiar among the mass.
After Bitcoin, many other cryptocurrencies have been developed. Bitcoin, Ethereum, and many other cryptocurrencies have taken the crypto market value to skyrocket limits.
Up to today, many cryptocurrencies are still being developed and almost anyone can mine one given that they have the right and updated tools and software.
Aside from that, there are many other things you need to know about crypto mining before delving into it, and the purpose of this post is to make this information available to you.
What is Cryptocurrency?
Cryptocurrencies or crypto as it is most times referred to is data that serves as a means of exchange. Every cryptocurrency, like BTC and ETH, are currencies that can be sued for purchases just like Dollars.
Unlike Dollars and other visible currencies, Bitcoin and other cryptocurrencies are regulated by a decentralized system. This means the bank or the government doesn't regulate the flow of the currency.
The decentralized system of cryptocurrency simply refers to blockchain technology. Blockchain technology involves an array of blocks systematically, however randomly placed. These blocks house data that contains records of transactions.
All these blocks are connected to one another and this is what gives it its security. If you are trying to hack into one block, you will have to hack into all other blocks in the chain to have access. There is a thin line between this and the impossible.
What is Crypto Mining?
There are a lot of ways to earn crypto and mining is one of them. Remember cryptocurrencies are digital and visible assets, so when we are talking about mining crypto, we do not mean using your trommels and sluice box to mine.
There are processes involved in mining cryptocurrencies, and they are all digital. Wpe will be addressing this later in this post.
Crypto mining involves using your computer system in addition to some specific tools and software to earn cryptocurrencies. The idea behind crypto mining is to solve a complex mathematical problem in which the result will verify a block on the blockchain. The process of solving this mathematical problem is called crypto mining.
Now, this may sound a bit complicated but the truth is that it actually is. Mining cryptocurrency requires some set of hardware and tools, though they cost a lot. The more they cost, the more efficient result they produce.
How Does Crypto Mining Work?
Crypto mining is as good as slang used to refer to the loads of work involved in completing a block in the blockchain. When you successfully complete a block in the blockchain, you earn a token for that currency. You can look at it as getting paid for an audit.
The audit involves verifying the legitimacy of every transaction that goes on in the blockchain. The essence of verifying these transactions is to ensure that there are no double-spending issues.
Double spending occurs when a crypto owner spends the same crypto more than once. Now in real life, this doesn’t happen because when you make a purchase with a dollar note, you hand that note over and it is no longer in your possession so you can’t spend it again.
As for the case of bitcoin and other cryptocurrencies, miners verify the transaction and ensure it is successfully completed and the crypto leaves the sender’s wallet to the buyer’s wallet.
The process of verifying crypto transactions involves complex mathematical problems just like we mentioned earlier. Solving these mathematical problems completes the verification process on the crypto transaction.
On completing the verification process, a block adds to the blockchain and it is connected to every other block in the chain. The person who completes the verification is a miner and he earns a token on every block he adds to the blockchain.
How to Start Crypto Mining?
Back when crypto was still at its genesis, anyone could mine crypto from their homes with a regular PC. However, this is no longer the case, to start mining crypto these days you still need a PC, not a regular, and a set of hardware and software too.
In crypto mining, there is a series of numbers called target hash. This series of numbers is a code containing letters and numbers that represent an encryption. To start mining, you have to guess the target hash. This requires your system, hardware, and a couple of cooling fans.
You can guess the hash by using NONCES – Number Only Used Once. The guesses are made by generating as many NONCES as possible and as fast as possible. Now, you must know there are thousands of other miners competing to generate these NONCES too, so the first miner that his NONCES creates a hash is awarded for completing the block.
How to Build a Crypto Mining Rig
A crypto mining rig is not actually a rig like an oil rig or something similar. A crypto mining rig is just like your PC but with an advanced graphics card. When it comes to crypto mining, the GPU does most of the tough and heavy works, not the CPU. So to build your crypto mining rig, you will be needing a very powerful GPU and not just one of it but dozens.
I like to think of the crypto mining rig as regular with a fair price attached to it but with one or more high-performance GPUs. To build your crypto mining rig, you need to connect as many high-performance GPUs as possible to your PC.
In addition, dozens of cooling fans must also be present to cool the temperature of the PC so as to avoid overheating as the PC will be running at a very high performance.
Since you will be connecting a series of GPUs to a single PC, you will need a motherboard that can house such capacity. To be on the safer side and to obtain an optimum result, you may be needing more than one Power Supply Unit.
When building a crypto mining rig, there are some factors and points to always have at the back of your mind. In this post, we have highlighted some of those factors and points.
- Building a crypto mining rig costs a lot of money.
- Power is an important factor you must consider as mining crypto consumes a lot of it.
- A crypto mining rig is not a regular PC. So you might have to be patient as getting everything to function perfectly may result in trial and error.
Factors to Consider Before Mining Cryptocurrencies
Before delving into crypto mining, there are some general factors that must be considered. Below are some of the factors to be considered before mining cryptocurrencies.
1. Energy Consumption
As a miner, your crypto mining rig must be running all through the day. Given that this rig houses a series of GPUs, it consumes a lot of power and this can be quite expensive. Paying for the electricity mining cryptocurrency consumes will bring about a big dent in your plan. Especially if you are in a city with a high cost of electricity.
A solution to this is utilizing renewable energy. It may cost more initially but in the long run, it costs less which is why it is a better investment.
2. Market Rate of the Currency You Want to Mine
Before you start mining at all, it is crucial you carefully choose the cryptocurrency you want to mine. This will help you in selecting more suitable materials and equipment and it will also give you an idea of the operational cost and the likely profit margin.
You will also have to preface the rate for the cryptocurrency you are mining. The market is a very volatile one. Not all trending coins can sustain their value, some of them are just given promotion on social media and are therefore overhyped and not worth sufficient value.
3. Mining Pool
A mining pool is a group of miners coming together to combine their computational intelligence in order to increase the chances of arriving at a faster result to the mathematical problems involved in mining crypto. The essence of the mining pool is to complete each block as fast as possible in order to earn the highest crypto token they can earn.
The best mining pools are those that offer profit in a short time and have a sustainable return. When you chose such mining pools, they make your bank account fat in no time!
6 Best Cryptocurrency To Mine
Mining cryptocurrency has a lot of costs attached to it and it is quite expensive. It would require you to spend a lot of money in purchasing expensive GPUs, arranging them together and finally spending much more to purchase power supply and other various components, however not all cryptocurrency requires this much power and cost. Some of the best and most economical cryptocurrencies that you can easily mine are listed below;
1. Monero (XMR)
Monero is one of the simplest and easiest cryptocurrencies that you can mine easily at your comfort. It is based on the CryptoNote protocol and Makes use of the Random X hash function for making increasingly complex mathematical equations.
You can mine Monero as a solo or join a mining pool where your computing resources will be used by others to achieve the desired results. You might be required to pay to join a mining pool, and you have an option to mine solo but you will need a high hash rate to find a block.
Monero can be mined by using a CPU or GPU, though GPU might seem more efficient and faster to make use of. To mine with the use of a CPU, you will be needing stable and dedicated software like XMRig or CSminer.
The most fascinating thing about Monero is that it has its own ASIC resistance which makes all miners able to use consumer-grade hardware to mine.
2. Litecoin (LTC)
One of the oldest coins available for mining is Litecoin, with so many people referring to it as the best secondary option for Bitcoin. It is an open-source peer to peer digital currency.
Mining Litecoin is an extremely great idea because it is solely base on the Scrypt protocol which does not support the need of investing in ASIC chips. Due to the fact that it is memory intensive, it is compulsory to mine with a GPU.
The main reason why Litecoin is a good choice for mining is that it is less volatile when compared to other altcoins. Litecoin also accepts important exchanges and has a relatively low cost of a transaction
3. Ethereum Classic (ETC)
Ethereum classic is built on the Ethereum Blockchain which forms a network hack years back. It became the updated version of Ethereum, with Ethereum as the original version.
Ethereum Classic is an open-source that can be easily mined and it makes use of a slightly modified mining algorithm than Ethereum. Ethereum classic support smart contracts and decentralized apps
4. Dogecoin (DOGE)
Dogecoin initially started as a meme coin and it now has a market value of over 20 billion dollars. It attracted a lot of attention from famous investors and this contributed to a drastic increase in its market value
Dogecoin is extremely infinite, and this makes it very unique and different from other cryptocurrencies. Just like Litecoin, Dogecoin also makes use of the Scrypt protocol for mining which makes its mining landscape more competitive and fair
5. Zcash (ZEC)
Zcash was designed with ASIC resistance which makes it very easy to mine for people who are using the regular hardware. ZEC is another famous cryptocurrency that you can use for sending and receiving money efficiently and easily
Zcash is an awesome choice for miners, you can join mining pools easily to get a constant payout and all miners are opportune to shield their ZEC from its Creation by using a shielded coin base, this means that miners can have their mining rewards transferred to a wallet address immediately.
6. Bitcoin Gold (BTG)
Bitcoin Gold has some similarities fundamentally with Bitcoin, which means that it is an offspring of the world's most popular cryptocurrency. Bitcoin is mined by making use of specialized mining equipment whereas Bitcoin Gold was specifically designed for mining through the use of common hardware
Bitcoin Gold is also popular and can be easily bought from any major exchange. For miners, mining Bitcoin Gold is a good choice because it uses the Equihash algorithm which is ASIC resistant, however, it requires a good GPU to start mining.
Mining cryptocurrency is an essential part of blockchain technology. It is a function that verifies and validates the transactions that take place in the blockchain to avoid double-spending. It is also a way of adding new blocks to the array of existing blocks.
Based on the complexity of mining, it requires a high-performance GPU, backed with an efficient Power Supply Unit and cooling fans to cool the rig down in cases of overheating.
This content should not be treated as investment advice. Cryptocurrency is a highly risky and speculative market.
- 5 Best Crypto Exchanges With Lowest Trading Fees
- 30 Crypto Slangs Every Beginner Needs to Know
- Everything You Should Know About DeFi
- Everything You Need to Know About Bitcoin
- How to Invest in Cryptocurrency: Beginner's Guide
- 6 Tips to Keep Your Crypto Wallet Safe and Secure
- Is Bitcoin a Good Investment?