Mining cryptocurrency
The process of generating new cryptocurrencies like Bitcoin, Ethereum etc is known as Mining Cryptocurrency . A vast network of decentralized computers spread across the world verify the transactions made and a ledger is maintained with a specific timeline spread throughout the network. A complex problem is executed and solved using the computing power of the network which is rewarded with increments of the cryptocurrency. Anyone can mine cryptocurrency.
Types of mining
GPU mining
In this process a GPU is used for its high computational power to solve the complex problem in a blockchain. GPU mining has become a latest trend these days as it is easy to set up and purchase. In recent days the over purchase of high end GPU’s for mining had caused a shortage of GPU’s which led to a sudden spike in their prices. although you need a software to mine from a GPU, but there is a question of profitability.
CPU mining
In this process a CPU is used for computing the complex problem provided in the blockchain, Beginning of the cryptocurrency there was a very less requirement of computing power , So CPU’s were sufficient to solve and execute the problems and maintain the blockchain. The profitability was reduced significantly so many are opting out of CPU mining.
ASIC mining
Application-Specific Integrated Circuit this is a specialized device which is designed just for the purpose of mining cryptocurrency. These devices are very high end mining Equipments , the cost of purchasing these devices is also very high compared to GPU’s and CPU’s. But they are very efficient in mining and majority of Large scale miners use these device to mine cryptocurrency.
Types of miners
There are two types of Miners
- Solo miners : They generally set up a small to large mining farm which run the algorithm and mine cryptocurrency, they are in direct loop with the specific blockchain.
- Pool miners : They are generally small miners who cant afford the cost of purchasing multiple equipment which is required to solve a single problem in the blockchain . So some companies and groups pool in the resources to form a large network of devices which can solve the problems to mine cryptocurrency. They usually charge a small amount for the maintenance of the network, they also provide a software to check and maintain the network remotely.
Small mining set up
Steps to follow for mining cryptocurrency
- Choose a cryptocurrency : First thing to do is choosing a cryptocurrency for mining, there are many choices like Bitcoin, Ethereum, Lite coin etc. The payout for each block of validation is different to each coin choose it depending upon your budget, Bitcoin requires high initial investment as it is the most popular choice.
- Create a Cryptocurrency wallet : A cryptocurrency wallet is the place where you store your cryptocurrency mostly like a digital wallet. There are many wallet service providers you can choose any one of them according to your comfort and the type of cryptocurrency you wish to mine. The most trending ones are Binance and Coinbase, you can choose any wallet from hundreds of wallets. But make sure it is secure and you can understand how it operates.
- Choosing the right Hardware : This is the most important part which decides your profitability and the investment required to achieve a specific earning goal. there are many websites where you can compare the hardwares profitability and then decide to buy it. The higher power means high profitability but initial cost is also high. It is always better to buy the latest and high end device for mining.
- Choose a mining Pool : This is where you link your device along with others to mine cryptocurrency. There are hundreds of mining pools to choose from, choose the one which supports the cryptocurrency you wish to mine, Also keep in mind about the charges of the pool account. Most of the pools are genuine, verify the payouts as some may be very weak and less profitable.
- Linking and Mining : The final part in which you link your wallet to your rig or pool account. Mostly the pool account providers give you a software to link your wallet and rig to their pool. where you can monitor all your process. Start mining after linking your wallet.
Key factors
These are the key factors to keep in mind before you start mining
- Cost of power consumption
- Initial investment for hardware
- regulations in your country
- Maintenance cost of the rig
- Profitability of the setup