What is Mining

Mining is the process of creating new coins and validating transactions on bitcoin and other cryptocurrencies like it. Mining requires a large number of computers worldwide utilizing high-end hardware to perform complex computational math calculations that ensure a particular blockchain is secured and prevents double spending or scam transactions on the network.

Mining occurs in a Proof-of-Work consensus mechanism to keep a blockchain secured, and miners are given incentives as they continue to maintain the blockchain.

What is Proof of Work?

A consensus mechanism is a process by which transactions on a specific blockchain are verified and validated. It ensures that the blockchain is secured and its integrity is maintained.

Proof of Work is one of the many consensus mechanisms around different blockchains. Bitcoin, for example, is the most popular cryptocurrency utilizing proof of work. Miners try to validate transactions by solving complex math problems that try to identify the hash of the last transaction, and when it is found and validated by several nodes, a block is created.

Types of Mining

There are four different types of cryptocurrency mining;

1. CPU Mining

This type of cryptocurrency mining requires you to use a mobile device or computer to mine cryptocurrencies.

In the early days of crypto mining, these were very common, but CPU mining isn’t practical any longer as it takes longer to earn any incentive from mining and comes at a very high cost. You will be required to pay so much more for electricity, and you could fry your CPU. Cryptocurrencies like Dogecoin and Monero can be mined using CPU but have extreme risks.

2. GPU Mining

This type of mining is widespread and relatively more affordable and reliable than the other options. To get started, GPU requires at least 2–8 graphics cards, a rig frame, a cooling system, and a CPU. You also do not need to know how to set it up; You can buy a whole rig online.

3. ASIC Mining

ASIC or Application-Specific Integrated Circuits are devices built mainly for mining cryptocurrencies. They are swift and decisive, allowing miners to build farms that can give them more control over the cryptocurrency they are mining and get very high incentives. If you’re trying to mine bitcoin, ASICs are highly recommended. A few blockchains are improved to make ASIC mining less functional, and they are considering banning them on some.

4. Pool Mining

This means putting computing resources together with other people to generate a higher computing power and verify transactions on a blockchain to earn bigger rewards.

The rewards are shared among the pool depending on the capacity of your contribution to the pool. These can be either favorable or not to each individual, depending on the setup, the number of miners in the pool, and the credibility of the collection.

Cryptocurrencies you can mine.

Crypto mining can only be done on cryptocurrencies that support the proof of work consensus mechanism, and here are a few of them;

• Grin (GRIN) — 60 grin for each block mined
• DigiBytie (DGB) — 434.54 DGB for each block mined
• Monero (XMR) — 1.26 XMR for each block mined
• ZCash (ZEC) — 2.50 ZEC for each block mined
• RavenCoin (RVN) — 2,500.00 RVN for each block mined
• Bitcoin(BTC) -6.25 bitcoins for each block mined

Mining bitcoin requires a specialised ASIC mining setup for you to be profitable.

How to get started with mining

There are a few steps to getting started with mining cryptocurrencies.

1. Create a crypto wallet that would serve as storage for your profits. There are a lot of options, from digital wallets like trustwallet and metamask to cold storage like Ledger.
2. Decide what type of mining you want to involve in and set up your mining hardware, or you could purchase a complete mining rig.
3. Get a mining software of your choice or join a mining pool. Mining software is usually free, so you do not have to pay a dime. Also, joining a pool can be a great way to get started, but it might also be a bad idea, depending on your mining hardware capacity.

Disadvantage of mining

• There are financial and regulatory risks attached to mining. You can invest much money into setting up your mining rig and not get enough profit to cover expenses due to the environmental concerns linked to mining rigs and their electricity consumption.
• It is also essential to consider the future of the cryptocurrency you intend to mine. Ethereum, for example, has switched to the Proof of Stake consensus mechanism. You could set up a mining rig for a cryptocurrency, and it changes the tool long before you recover your expenses.

Earning from mining

To ensure you are profitable as a miner, it is essential to consider a few components of cryptocurrency.

• Difficulty — This determines how long it will take for mining to complete, how much you’ll make, and if your mining rig is capable of participating.
• Rewards — Consider the incentive that would be gotten from mining the cryptocurrencies and if it is worth your time and effort.
• Hash Rate — Identify the total computing power required and if your mining rig can make significant contributions.
• Operational Cost — Calculate the cost of set up and maintenance of your mining rig, including tax, if your country has regulations and compare it to the potential incentive.