What is Crypto Mining: Tips for Beginners

At the dawn of the cryptocurrencies’ emergence in 2008, digital coins could be mined by all enthusiasts with access to a computer and the internet. The more popular the crypto market became, the more people wanted to create a digital reserve for themselves. This provoked a sharp complication of the algorithm for guessing the required combination of numbers. An ordinary computer could no longer cope with the complicated algorithm, so specialised equipment had to be created. At first, users turned to powerful video cards. Then, even their capacity became insufficient. Video card manufacturers developed special equipment for mining cryptocurrencies (Bitcoin and others), called ASICs. Each model has advantages, as well as disadvantages.

What is Cryptocurrency Mining?

Cryptocurrencies are digital assets that have no physical form. The reliability of transactions is confirmed by independent network participants, who then receive a commission for this. All transactions are recorded in a public distributed ledger. However, for the algorithm to work, users must solve the block and add it to the chain. As a reward, new cryptocurrency coins appear and are credited to the user who confirms  the block. A cryptocurrency miner needs to find an equilibrium between the expenditure on hardware and electricity, and the amount of commissions earned.

In some countries, mining is allowed, while in others it is equated to money smuggling. The legal status of cryptocurrencies and the technique of their production is changing. For example, the President of Iran recently instructed the government to develop a state program for the extraction of cryptocurrencies. Previously, Iran issued licenses for such activities to private companies. You can find more information about this here: https://www.coindesk.com/rouhani-bitcoin-mining-iran.

How does Cryptocurrency Mining work?

The more expensive a crypto coin is, the more miners want to mine it. Bitcoin earnings fell due to high competition which reduced the level of profitability from adding one block to the chain. Popular cryptocurrencies such as Bitcoin and Ethereum have long been mined using sophisticated equipment (mining farms) or as part of a pool (an organisation that brings together the processing power of several hundred crypto enthusiasts).

Cryptocurrency mining consists of two processes:

1. Adding transactions to the blockchain. Thus, at the same time, the validity of the transaction is checked and the network is protected from double counting.

2. Issue of new tokens.

Individual blocks added by miners must contain proof of work or PoW. This requires a vast amount of computing power. An ordinary computer is unable to solve a block of cryptographic hash functions. During the process of mining, you need to find a numerical value of a certain length or less than the target. The miner who is the first to achieve this, receives a reward.

Mining Software

A Bitcoin mining rig is produced by connecting specialised integrated circuits together.

Mining software also plays an important role. It facilitates the process of mining coins in several ways:

• Connects a computer directly to the Blockchain.

• Connects PCs with mining pools.

• Connects an account to a cloud mining site.

To improve results, developers have released mining software for different operating systems: HASHR8 for Linux, BRAIINS for Windows and HIVE for MacOS.

How profitable is Bitcoin Mining?

It is important to calculate the cost of BTC mining. Mining profitability is cyclical and volatile, like cryptocurrency rates. During times when there is an outflow of miners to other industries, competition decreases and profitability increases. If a user can afford to invest in powerful hardware, the returns are also better.

Before investing, consider the following points. The better these conditions are met, the more chances you have of making a profit:

• For most cryptocurrencies, video cards with at least 4 GB of memory are appropriate.

• An ideal edition would be the DDR5 standard.

• Effective cooling protects equipment from overheating and premature wear.

• The right variant would be to use 256-bit video cards.

• It is  a good idea to combine the equipment with each other using BIOS settings.

• Video cards and other technical equipment must be integrated in large quantities. Most of the crypto community believes that it is best to combine four to six cards in one setup to create a coherent whole.

The main criterion is the power potential of the equipment. If the user is able to recoup the cost of the equipment and start earning, they have made the right decision to mine cryptocurrency.

After another Bitcoin halving, the miners’ reward was 6.25 BTC for one mined block. The ability to guess the required value by the miner alone is estimated to be 40 thousand times lower than the chance to win the lottery. Mining equipment also requires financial investments of at least several thousand dollars. Thus, many novice miners have considered  mining other cryptocurrencies. This can produce tangible profits in the future. You can still mine new cryptocurrencies using video cards. For a useful overview of the various models, see this article https://cointelegraph.com/news/top-graphics-cards-that-will-turn-a-crypto-mining-profit.

Mining Pools

Another way to guarantee money through mining is to join the mining community. Collective efforts increase the chances of success, and profits are divided in proportion to the contribution of each participant. The user pays a small percentage for membership to join the pool. The greater the number of members in the community, the greater the chances of being the first to add a new block to the chain. But at the same time, payments to users are smaller, since the amount is divided among everyone.

Conclusion

Mining cryptocurrencies is not the fastest way to obtain coins. If we are talking about popular coins like Bitcoin, then it is not only difficult to get them, but also expensive. If a person wants to quickly get hold of some cryptocurrency, it is easier to buy it on an exchange. Moreover, many exchanges allow you to pay for a transaction directly with fiat money. If mining is a hobby or a long-term investment, a thorough hardware and software analysis should be carried out and estimated electricity costs should also be taken into consideration.