CryptoCurrency mining has been around for almost 10 years. It started with Bitcoin mining in 2009, building fortunes for some, and pushing others out of business. But let’s not rush and first learn what cryptocurrency mining is:
What is CryptoCurrency mining?
All cryptocurrencies have the same thing in common- they are secured by cryptography(that’s why they’re called “cryptocurrencies”).
In a nutshell, many computers from all over the world connect into the same network. They solve complex mathematical puzzles, and make sure that a once approved transaction stays approved forever.
Blockchain is the process where all transactions are stored, and all computers make sure that Blockchain cannot be altered backwards. A stronger network usually means that more computers secure it. And stronger the network is, harder to hack or alter it. That’s why the system had to include an incentive for people to join and utilize their computers for this purpose. The incentive is proportional to computers strength, and it is given as a coin of the currency that they protect. This process is called cryptocurrency mining, and people who engage- miners.
Simply put, you rent your hardware to protect the cryptocurrency network, and get rewarded with some cryptocurrency in return.
The five cornerstones of crypto mining
There are 5 things involved in cryptocurrency mining, and getting grasp of those is essential in order to mine successfully(and profitably).
Mining hardware
The hardware used for mining isn’t much different from your ordinary PC. No matter what you mine, a standard set will be needed- power supply, motherboard, CPU, GPU, hard drive, network port and peripherals. However, mining is all about calculations, so the essential and most expensive parts are CPUs and GPUs. This is also why the more experienced miners often place multiple GPUs inside machines. As higher number of GPUs means more power and profit, they often buy motherboards that have multiple GPU slots, thus saving space and money on other PC components. And when world started catching up- new specialized mining hardware was born. Now we also have ASICs(Application Specific Integrated Circuit), which can’t be used for anything but mining. But at the same time, they’re very good for mining and easy to use. The good news is- you don’t need to know any of this to begin. Your own PC will suffice for testing and also earning some crypto along the way.
Mining software
The first few years of BTC mining were fairly tough on the average PC user. And in my own opinion, this was one of the biggest problems that prevented Bitcoin mining from widespread adoption. First, it was relatively hard to find the info and get involved. And then, those who have found it and tried were struck with complications and a requirement to be an advanced PC user. I’m a web developer and administrator, so I don’t mind working with console applications. But for an average user, this is a big and stressful step. What mining software basically does is utilize hardware for mining purposes. Except connecting your info and monitoring, the process is mostly automatic. Still, it took years for crypto enthusiasts to realize that console miner won’t get their product adopted in the 21 century. After several years, mining software with a GUI started showing up, bringing simplicity and ability for beginners, necessary to bring mining into homes from all over the world. Thanks to this, anyone can start mining today, with their own PC and simplicity in range of using an ordinary software, like a music player or text editor.
Mining difficulty
Contrary to its name, the mining difficulty isn’t that difficult to grasp. Since anyone can join and start mining his crypto reward, everyone would actually join at some point and start earning. But this had to be prevented in order to be able to pay everyone who joins. That’s why mining difficulty was invented. It’s purpose is to regulate the reward system, making the rewards smaller as more and more people join. Likewise, when people start leaving the system, the difficulty goes down thus increasing the mining rewards. Although mining difficulty does define how much crypto coins you’ll earn with certain mining power, it doesn’t really define how much you can earn in USD(or any other FIAT currency). Which brings as to the fourth cornerstone:
Mining earnings
As we just learned, the mining difficulty decides how much cryptocurrency you earn with your hardware. But how much dollars you can make depends on your ability to understand crypto markets. Crypto markets are working 24 hours per day, every day, and are the most fluctuating markets that we yet experienced. It put many people out of business, but many became rich as well. Basically, every better known cryptocurrency has a price in US dollars, and this price goes up and down- usually on daily basis. This is why selling as you mine isn’t always the best option. A coin worth $10 today, may be worth $10.000 in the future. Same logic applies when the coin is falling, so going permanently to $0 is always an option as well. Beginner miners don’t need to worry a lot though- using your own PC means there’s no capital needed, and you can just stop mining if the market goes sideways.
Mining energy
Even though beginner miners don’t need to care about buying the mining equipment, there’s an expense you can’t avoid regardless of your mining level and skill- energy. Mining process is energy intensive, and this means that your PC will work hard in order to solve complex mathematical puzzles and earn you some coins. A good analogy of mining is gaming. They both use lots of resources, thus spending lots of electricity. Depending on your country of residence, this single factor can decide whether mining is profitable for you or not. In countries with cheap electricity(up to 5 cents per kW), mining is still very profitable. In countries with pricier electricity(around 10 cents and above), mining is often not profitable. But as mentioned before, mining earnings heavily depend on difficulty(amount of coins you get) and price(how much $$ one coin is worth). What this means is that even if you pay your electricity a lot, mining can be profitable when done strategically.
I’m in, how to start mining?
If you find this interesting and want to try it out- you can do so today. Luckily for you, cryptocurrency mining is much easier in 2019 then ever before. For starters, just turn on your PC, download the GUI mining software and give it a go. If you’re not sure how to proceed, I can recommend you this little guide, which should get you up and running today.
*This is a guest post.