Crypto mining is the process through which bitcoins and altcoins are created. For those looking to be miners, appropriate hardware and reliable internet connections are a must, along with complex skills. The individual who mines the crypto is permitted to place the next block on the blockchain. The rewards accrue in the form of transaction fees associated with the transaction within the block and the freshly released coin, referred to as a block reward.
Mining rates are adjusted for every 2016 blocks, which roughly comes up to 2 weeks. To ensure the block rate discoveries progress at a constant rate, the computational power used for mining is adjusted for difficulty.
How Crypto Mining Works
The crypto miner’s profitability depends on the hashing power he/she contributes to the network. A miner does not progress forward with standard desktops. Advanced technologies and hi-tech systems are needed. Mining cryptos is like a race for the digital currency. Early adopters are rewarded. Bitcoin was the first decentralised cryptocurrency released in 2009. Since then, many spin-offs have made their way to the market, along with altcoins. While bitcoin mining is for larger operations, for beginning miners, the right choices are Scrypt-based cryptos like Litecoins, Feathercoins, and Dogecoins. At the present value of the Litecoin, miners stand to gain up to USD 10 per day. The other two altcoins would yield less profit with the same mining hardware, as would Peercoins but the ROI is decent.
Why Mine?
As more individuals join the cryptocurrency rush, mining gets difficult. This is because the costly hardware is needed to discover the coins. Investing heavily is the only option if you want to mine bitcoins; other altcoins are easier and a less expensive proposition. While crypto mining is great to supplement your income, setting reasonable expectations is a must. Consider the electricity costs, video cards invested in (depending on the cryptocurrency chosen) and the upfront investment in purchasing 4 ASIC processors/4AMD Radeon GPUs. The whole key to mining is to keep costs down.
For mining, an individual miner will need a private database or coin wallet, a mining software package, membership in an online mining pool, membership at online currency exchanges, reliable internet connection and hardware set up. Not only this, one will also need a desktop or customised computer for mining. A separate dedicated system is a must. Laptops, gaming consoles or handheld devices cannot be used for mining.
How Has Crypto Mining Advanced?
Starting in 2009, crypto mining was used with CPUs of standard computers being used to hash and mine bitcoins. But the mining industry soon made the transition to GPUs which could solve cryptographic puzzles and hash at faster rates. The rate of solving crypto puzzles to mine successfully is the Hashrate. Miners soon learned that hashrates were essential for income.
Soon, single GPUs were replaced with multiple GPUs also called a mini farm. Multiple GPUs further accelerated the hashrates. Miners using mini farms soon switched to power consumption through FGPA/Field Programme Gate Array giving them an edge over miners using GPU and further down the line, CPUs. Miners with Application Specific Integrated Circuits or ASIC were next. These were developed for mining cryptos with ASIC miners becoming mainstream in 2012.
This never-ending process of computational power adjustment necessitated an increase in the complexity of calculations, so discovery rate remains constant. Miners have now moved away from mini-farms to data centres, which offer economies of scale. The market has also seen the emergence of cloud mining, which cuts down on mining tools and power cost, leading to reduced income as a result. Clearly, crypto mining is on the rise, and so are the technologies associated with it.
Disclaimer: “This article was contributed by the CEO of Blackmore Group, Phillip Nunn. Entrepreneur, financial expert, corporate evangelist, fintech and crypto trading authority, Phillip is an industry speaker and renowned thought leader on topics such as Fintech, Cryptocurrency, and Blockchain technologies. Follow his blog“
