Cryptocurrencies only exist in the digital world – which is why, from their creation to their distribution, each and every process is completed electronically. A crucial part of this process is called cryptocurrency mining.
What is Cryptocurrency Mining?
Miners are responsible for solving complex mathematical problems using mining software. This is how a transaction is verified on the network and sent to the blockchain. Miners are then rewarded for their work with cryptocurrencies. According to Blockchain.info, blocks can hold thousands of transactions.
However, the number changes since every cryptocurrency has a different block size and transaction speed.
A Little Fact …
There are two important types of mining on different consensus algorithms: Proof of Work (PoW) and Proof of Stake (PoS). Simply put, PoW requires miners to solve problems, which requires a great amount of computational power. On the other hand, PoS distributes shares to miners based on their existing wealth, which requires less energy and is more cost-effective.
Mining cryptocurrencies is an easy process if you follow all the steps properly.
Step 1: Buy Appropriate Computer Hardware
Owing to low processing power, an average computer is unable to mine blocks for cryptocurrencies such as Bitcoin and Ethereum. Which is why Graphical Processing Units (GPUs) and Application-Specific Integrated Circuit (ASIC) are the front runners in cryptocurrency mining.
- GPUs – Cryptocurrencies such as Zcash, Ethereum and Monero can easily be mined with GPUs. Some of the best GPUs include Nvidia GeForce GTX 1070, AMD Radeon RX580 and Nvidia GeForce GTX 1060.
- ASICs – From Bitcoin and Litecoin to Ethereum, ASICs are successful in mining almost all types of cryptocurrencies. Some of the best ASICs include Antminer S9 and AvalonMiner 921.
Step 2: Setup a Cooling System
Since mining hardware releases a lot of energy in the form of heat, it is important to adopt ways to cool the system down. Electric cooling fans and air fans placed next to the hardware can help you solve this problem. If the heat still intensifies, open the windows or turn on the exhaust fan/AC.
Step 3: Setup a Wallet
Cryptocurrency exchanges such as Coinbase can be used to open an account where you will receive the rewards you earn from mining.
Step 4: Download Mining Software
There are different mining softwares available for mining different cryptocurrencies. Once you find a legitimate one, connect it to your hardware. Beware of dodgy software present on the internet.
Step 5: Join a Mining Pool
Mining cryptocurrencies on your own is profitable only when the currency is new. As the difficulty levels increase, your chances to mine the cryptocurrency decrease.
Mining pools are groups of miners who share their computational power to mine cryptocurrencies in a short amount of time. The rewards are shared among the members according to the specified rules. Once you join a pool, follow the instructions provided by the software to start mining right away. Some of the famous mining pools include Slush Pool, AntPool and BTC.com.
That’s it – you are now a cryptocurrency miner! However, make sure to check the rewards you obtain for mining cryptocurrencies. It is always important to observe whether you are making more money than you are spending on your electricity bill.