A previous couple of years clearly showed that the cryptocurrency industry is not even going to stop. The skeptical predictions of many experts have not come true, and mining is as high as ever and continues to evolve. In addition, the number of people who want to try themselves in this business has risen. But since it is quite difficult and requires certain knowledge, not everyone decides to take this step. Agree, it is very difficult to reason something when you can not even understand, for example, Whatsminer m31s profitability. Not to mention figuring out the nuances of hardware, software, and trading.
So in this article, we will introduce you to everything you need to start mining and be successful at it. Let’s take a look at what cryptocurrency is, and then we’ll get to the bottom of mining. We’ll explain what types of mining there are, and we’ll reveal their advantages and disadvantages.
What is Cryptocurrency?
Cryptocurrency is a type of asset that functions through the mechanism of asymmetric encryption. The purpose of encryption is to ensure reliability and security. There are hundreds of such digital currencies, with bitcoin being the best known. Another of its features is that it does not involve banks when verifying transactions. In essence, it is a peer-to-peer system that allows any user, anywhere, to send and receive payments. When transferring funds in cryptocurrency, transactions are recorded in a public registry and stored in digital wallets.
Cryptocurrencies are processed in a blockchain, where records of all transactions are kept and updated by the holders of the currency. Coins are created through the process of mining. Users can also buy currency from brokers and engage in trading.
What is the Essence of Mining?
To succeed in mining you must know absolutely everything about it down to the last detail. Here, unfortunately, without studying all the theory will be very difficult.
Simply put, mining is the process of creating digital currencies. But it should not be compared to the issue of money, because mining has certain functions and tasks for the performer. The fact is that most cryptocurrencies operate on the principle of decentralization. This means that all transactions in the network are handled by any willing user connected to this same network. And to motivate users to spend their time and computer power to process transactions – the system creates and accrues remuneration to miners in the form of cryptocurrency or its part for a certain number of processed transactions.
But as we said earlier, most cryptocurrencies are based on blockchain technology, so the complexity of processing cryptocurrency transactions is constantly increasing, and the remuneration goes to the one miner who processed the transaction first. Thus, mining is not speculation and gambling, but serious work that requires certain knowledge.
Types of Mining
Depending on the number of participants mining can be divided into solo and pool. There are 4 main types of mining, namely:
This is the oldest and best-known type of mining, it is also called home mining. The idea is that you do everything yourself. You buy the equipment, allocate space for it, set it up and connect the software. This method creates a lot of inconveniences because the equipment creates a very loud noise, as well as heating. Therefore, it will be difficult to do it at home, even if you find some room, there is always a chance that while you are away there may be some breakage and the equipment will burn. Although in this case, you do not share your spoils with anyone and everything comes to you personally.
Pools are like a group contributing to the mining process. You participate using your limited computing power and get rewarded according to your hash rate. All it takes is finding the right server for you and joining it. But it is important to keep in mind that you will also share the mining with other pool participants.
With cloud mining, you sign a contract with the service and rent the computing power from them. You don’t worry about hardware, software, or maintenance hassles. You pay a recurring fee and mine the coin of your choice depending on the availability of the cloud miner.
Essentially, you are investing in mining that is fully managed by others and you get rewarded based on the hash rate purchased along with the contract.
Such services mainly specialize in bitcoin mining, which makes them quite popular and in demand. In this case, you physically place your equipment on the hosting, and everything else will be done for you by the staff. Their responsibilities include equipment maintenance, repairs, security, and more.
You can also buy bitcoin mining hardware directly from this service if they have a store. It is very convenient, then they undertake all obligations to fix this hardware and of course, they give a long term warranty. This method of mining is now considered the most popular and profitable.
Equipment for Mining
When cryptocurrency first appeared, it could be mined with a simple computer. But now everything has changed and you need either a powerful graphics card or even an ASIC.
Mining with video cards has been the most popular for a long time. But now not even one or two GPUs are needed anymore. And for bitcoin mining, they are no longer suitable at all. But it has its advantages, for example, they are easy to reconfigure for different algorithms. Also, in the case of a breakdown, they usually have a good warranty.
ASIC is a specialized bitcoin mining hardware that is many times more powerful than any other equipment. It requires less electricity than mining farms of dozens of video cards. But it gets very hot, so it needs good cooling. Mainly such equipment is used by the mining hostings because it is superior to everything else and is the best option at the moment.
In short, cryptocurrency mining is a business for technically savvy people. It is an unpredictable market. Therefore, before investing your money, it is better to study the situation carefully. It is not enough to install bitcoin miner hardware and do nothing, it is a labor-intensive robot. But if you do it right, you are sure to achieve great success in this interesting business.