Short Guide to Cryptocurrency Mining

Cryptocurrency mining refers to the computerized process in which all cryptocurrency transactions are verified and then recorded to the blockchain ledger. Cryptocoin mining has grown exponentially over the years.

 

What is Cryptocurrency Mining or Crypto-mining?

Each time a crypto transaction is completed a miner ensures the authenticity of data before the transaction is recorded to the blockchain. This process verifies that the coin hasn't been expended again and calculates the input/output expenses. The first miner able to crack the cryptographic code by solving the corresponding mathematical function (‘proof of work’) gets a reward. The reward is in the form of a cryptocurrency unit. The mining process creates competition between miners, as the coin rewards are fixed and limited.

The Short History of Mining Hardware

Originally, Bitcoin was designed to be mined on CPUs. Later, Bitcoin miners discovered that graphics cards could offer them more hashing power. Finally, ASICs (Application Specific Integrated Circuits) became the industry’s standard for Bitcoin mining.

 

 

The Real Task (Calculating Hashes)

In order for a block to be created, a cryptographic hash is needed too. By default, this corresponding hash must meet certain criteria. The only way for a miner to match these criteria is by calculating as many hashes as he can and wait until he gets a matching result (matching hash). When the right hash is discovered, a new block is formed in the blockchain and the miner is awarded some cryptocurrency units. The degree of difficulty when calculating hashes scales over the years. That means that every new block becomes harder and more expensive to mine. In other words, Bitcoin mining will become less profitable in the future unless the price of Bitcoin moves constantly higher. Moreover, Bitcoin and other crypto have a finite limit of units that can be generated. For example, only 21 million Bitcoins can be generated. After that amount of Bitcoins is completed (21 million), Bitcoin mining will not generate any rewards.

 

What is Bitcoin Hashrate?

Bitcoin hashrate refers to a calculated numerical value that estimates how many hashes are being generated by Bitcoin miners trying to solve the current Bitcoin block or any given block.

• Bitcoin hashrate is measured in Hashes per Second or H/s
• The more the Bitcoin hashrate the more secure is the Bitcoin Network
• The calculation is based on the current mining difficulty and the average Bitcoin block time (between mined blocks versus the defined block time)

 

Find the: ► Historical Bitcoin hashrate chart

 

Cryptocurrency Mining Requirements

Cryptocurrency mining involves the one-time investment cost plus some operational expenses:

1. Computer Hardware -$1,500 minimum (one-time cost)
2. Electricity Bills (main operational cost)
3. Internet Connection Bill (secondary operational cost)

To get started with mining, crypto coin miners will have to obtain the following hardware/software components:

1. A stable internet connection (2.0 megabits/second or faster)
2. A cryptocurrency mining software package (usually free)
3. A coin wallet, for storing mining earnings (usually free)
4. A state-of-the-art computer system (dedicated for mining)
5. A specialized GPU or a specialized mining ASIC chip (more efficient)
6. Cooling mechanisms for the hardware
7. Membership in an online mining pool

Notes: (i) More sophisticated mining systems contain several GPUs/ASICs working in conjunction (ii) The cost of obtaining a new unused ASIC device is between $500 and $3,000 chip.

 

Mining Pools

In order to deal better with the expenses, Bitcoin miners often work together as a team and pool their resources in order to maximize the potential of profiting from the Bitcoin mining game. This collaboration of miners is called a 'mining pool'.

 

Mining Software

Currently, these are some popular crypto mining applications:

• EasyMiner (free software)
• BFGMiner (free software)

 

Which Coins are more Profitable for Miners?

As more people get involved and cryptocurrency mining becomes more and more a competitive field, the rewards get smaller. According to the stats of the website CoinWarz: https://www.coinwarz.com/cryptocurrency

At this moment, these are the most profitable altcoins to mine:

• Ethereum-Classic (ETC)
• Ethereum (ETH)
• Verge (XVG)

 

 

Summary -Bitcoin Mining at a Glance

These are some key points of cryptocurrency mining:

• 24/7 Bitcoin mining is an essential process for the Bitcoin ecosystem
• Bitcoin mining involves verifying transactions and creating blocks
• Miners get rewards (coins) for their efforts
• Bitcoin mining is not legal in every country, currently, Bitcoin mining is legal in 107 countries
• Miners need a combination of computer hardware to perform their tasks including a dedicated PC, a fast internet connection, and an ASIC mining device
• The minimum investment is around $1,500
• Effective mining involves large electricity bills
• For individual miners, using their own dedicated hardware, the annualized profit is usually around $500
• If the price of Bitcoin increases mining becomes more profitable (and vice versa)
• The degree of difficulty when calculating hashes scales over the years
• Nowadays, Bitcoin mining is really profitable on a large-scale operational basis
• At the moment, the most profitable individual mining occurs in Ethereum Classic, Ethereum, and Verge

 

■ Cryptocurrency Mining Tutorial

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