Cryptocurrency mining has become very popular when the value of Bitcoin increased drastically.
All of a sudden, a lot of people wanted to use their computers, and graphic cards, to mine for all kinds of cryptocurrencies. But how does cryptocurrency mining, or cryptomining, work exactly? Does it have anything to do with real mining? And what do you need to know to go mining for coins yourself? In this article we will help you on your way.
What is cryptocurrency mining exactly?
Don’t worry, you won’t have to go into a dark mine shaft with a pickaxe to go mine for coins. This type of mining is all done via your computer. In fact, once you have the mining going, you won’t have to do anything. The coins will just come in by themselves. Making transactions with cryptocurrency work differently than what we were used to with regular money. The currencies work with a blockchain. This is a collection of blocks on which all the transaction data is stored on a transparent ledger. These stored transactions are visible to anyone
Every time a transaction is made using Bitcoin, or other minable currencies, it needs authorization on the blockchain. Miners, people who run the mining software from their computer, are busy solving difficult mathematical problems with cryptographic functions on one of the blocks of the blockchain. This block contains all the transaction data. The miner who solves the mathematical problem first is the one authorizing the transaction. As a reward, this miner receives a small fee of the cryptocurrency in question. The stronger the computational power of your computer, the bigger the chance you get to solve the problem first.
What do I need to start mining?
So stronger computers solve the mathematical problems faster, leading to more rewards. But what makes a computer stronger for cryptocurrency mining? Most currencies are mined using the graphics processing unit (GPU) of your computer, the graphics card. The more powerful your graphics card, the higher the hashrate of your mining will be. The hashrate is the speed at which the hardware computes the operation. There are coins that can be mined using a mobile phone, but you can imagine that the results of those are negligible compared to a desktop computer with a powerful graphics card. You could also use special mining hardware, called mining ASIC chips. These vary greatly in price. The cheapest one will cost around $100, the most expensive one will set you back a whopping $3000.
Although the programs run in the background, they do take up pretty much all computational power of your computer leaving it as good as useless for anything else. This also means that your computer will use all the electricity it can to mine at full power. Your computer will heat up, so a good fan will definitely help keeping your computer cool, and fast.
What about mining software?
Besides the hardware, you will need mining software. Depending on the coin you want to mine for, they are usually small, free programs that run in the background. You can find the needed software on the webpages of the mining pool you decide to join. Sure, you can go out and mine on your own. If you happen to find a block and solve it, the reward will be all yours. But the chances of finding a block on your own are slim to none, especially with Bitcoin. The difficulty of finding blocks gets harder after each block. Bitcoin has been mined for quite a while, so finding a block on your own, even with powerful hardware at your disposal, is very hard.
So in order to be more successful in cryptocurrency mining, you should join a mining pool. Here you are teamed up with other miners, sharing the rewards you find together.
Once you are happily mining away, you will want to be able to receive your rewards. For this you’ll need a coin wallet. This is a digital location where your coins will be stored. Eventually, you can even choose to transfer your balance to a hardware wallet, keeping them more secure.
Can I mine something other than Bitcoin?
Bitcoin has been mined for years now and the difficulty of finding a block is pretty high. To be successful you’ll need powerful hardware and preferably access to cheap electricity. There are lots of other coins out there though that can be mined using more common hardware. Some coins can be mined using the computational unit of your computer (CPU), instead of the GPU, or both.
Newer coins will be easier to mine than older ones. At the time of writing for example, if your computer reaches 1000 H/s, mining Monero will get you 0.006 XMR a day. With the same computational power, you will mine 2.8 Electroneum, or 8.65 Aion. In US dollars, that is either, $0.57, $0.02, or $4.37. So what coin should you mine for? It is up to you to decide for which of all the available cryptocurrencies you see a brighter future.