Crypto mining explained
You might have already heard about ”mining,” “miners,” or “mine crypto.” After cryptocurrencies appeared in the global market, these words have become widespread in the crypto industry.
Simply put, mining is the process of generating new crypto coins. Mining is needed for validating transactions and adding coins to the public ledger also called a blockchain.
Therefore, mining is aimed to:
- generating new crypto coins as miners receive remuneration for each added block;
- proving transactions on the blockchain. Notably, everyone can view transaction history in the public ledger.
Bitcoin is the most popular crypto. Let’s dive into the topic using the example of Bitcoin mining.
First of all, miners need powerful mining devices. A simple laptop does not possess such computing power for this purpose. So miners should use proper hardware.
In addition to the hardware, miners need special software and a mining machine. The choice of the latter depends on the currency to be mined.
Electricity is another important aspect of mining. The energy price should be low since the mining devices work 24/7. By the way, high electricity consumption is considered a huge disadvantage of mining. It is expensive and harmful to the environment.
ISo, a bitcoin miner solves crypto-hash problems with the help of technology, software, mining installations, and high power consumption. Bitcoin transactions are verified by the network and added to the registry. As a result, miners are rewarded with bitcoins.
Let’s talk about the mining process in more detail. Blocks are connected with a hash, which is a reference number for each block in the blockchain. To calculate the hash of one block, miners need to find the hash from the previous one. This is not a trivial task even for a modern PC. That is why powerful machines are extremely important in crypto mining. In addition, the more blocks have been created before, the harder it is to create the following blocks. Although the rate of crypto grows and its supply decreases.
Accordingly, the miners receive a reward in the form of cryptocurrency for creating each block.
Some miners find it easier to team up and mine crypto with the help of pools. In this case, the power of all users in a particular pool is combined and each miner gets their own task. This is a time-proven way to earn on mining. However, miners are charged with a commission.
When mining with graphic cards, you need to download the software, add your wallet to the program, and run it. At the same time, the equipment is quite expensive. It includes a reliable power supply, graphic cards, a motherboard, and PCIe risers. You will also need at least 4GB of RAM.
If buying hardware seems too difficult and costly, you can try cloud mining. In this case, you rent computing power from data centers. The advantages are obvious - there is no noise from the equipment and less cost at the start. However, you will have to pay a commission and will not be able to control the equipment. In addition, you may become a victim of fraudsters.
Anyway, it is better to stick to a balanced approach. Evaluate which option is right for you, consider all the pros and cons, and start earning on mining.
