Crypto mining is one of the most tricky and confusing aspects of the whole cryptocurrency business to many people. Most people do not really understand it, and in this article, I will seek to break it down in terms that are understandable to all. I will explain the basics of crypto mining.
Cryptocurrency, of which Bitcoin is the most popular currency, but by no means, the only currency, includes LiteCoin, Ethereum, Dogecoin and many other altcoins.
It is a revolutionary and incredibly significant technology that needs to be really understood. Now is the time to know and invest in it because it is a kind of technology and currency that favors early investors. So get in on it now and get ahead of the competition and curve if you don’t want to be left trailing and playing a game of catch-up when it is too late. The earlier you know about it and get into it the better for you.
So what is crypto mining? When you hear the term ‘mining’ what usually comes to your mind? It could be mining for gold, silver or other precious and scarce resources. There are a lot of ways in which crypto mining is similar or analogous to mining for gold or some other resources.Mining involves looking for resources using skill , effort and tools.
But how is it possible to mine crypto-coins and get rewarded for it? What does mining achieve?
To answer this question we need to understand a basic aspect of cryptocurrency: The Blockchain.
In simple terms, the blockchain is a public ledger system. It is a ledger because it contains every single transaction that has been made , and the owners of every single cryptocurrency that is in circulation. So when you sell or buy Bitcoins or any other form of cryptocurrency, the individual transaction is recorded and uploaded to a block. That block is then digitally followed by or linked to another block and that block with another block to form a chain; Blockchain. These transactions are public, that is , they are visible to another people.
So how does this relate to crypto mining? One of the functions of a crypto miner is adding these transactions to the blockchain. The other function is the production of these coins, or in mining terms, the unearthing. Well, the creation of the blockchain is done by the miners. The miners, using software that run on computers or specialized mining devices, compute these transactions. The miners use something called nodes, or mining nodes, to compute these transactions. How? Nodes are powerful computers that run cryptocurrency software and relay cryptocurrency information. By means of nodes information about transactions is spread all over the network. First, one node relays information to another nodes or nodes it is connected to, these ones relay this information to other nodes they are connected to and these continue the relay of information until the whole network has this information.
The specialized nodes (mining nodes), do the job of grouping these transactions into blocks then adding them to the blockchain. This complex procedure is done by means of mathematics. Imagine a block of a transaction as an unlinked coach of a train. For this coach to be part of a train it needs to be linked, right? Likewise, for a block to be linked to the blockchain, a mathematical puzzle needs to be solved. A number has to be found that when it is combined with the numbers in the block and is passed through a ‘litmus test’ ( the hash function), it will produce a result within a particular range of numbers (from 0 to 4,294,967, 296). This hash value uniquely identifies data. Once the value has been found, the first to find it is given a reward and everyone moves on to the next block.
So how is this number, this hash value gotten? It has to do with luck and computing power. The miners have to guess a random number. This number is very difficult to get because of the presence of the hash function. Using computers a number is guessed and the hash function is added to the value along with the information or data in the block. That is , random number + hash function+ data in the block. To make it even more difficult, even two consecutive numbers will give very different results. Conversely, several numbers can give the same result or they might be no numbers or nonces that produce the desired result. In this case , the miners just try but with another block configuration.
Is there a limit to the number of coins you can mine?
Well, it varies from coin to coin. Part of what ensures that Cryptocurrencies have a steady regulated release of coins is the reward block.For example, there are 21million Bitcoins that will ever be mined and created and there will never be a single number above 21million coins. The block reward is used to regulate the amount generated. Take as an analogy the onset of a gold rush. At first the gold is easy to mine and access, but over time, with more people involved in mining, the mine produces less gold and miners have to dig deeper and longer. Similarly, a release pace (reward block) is a means of regulating the amount of coins that can be mined at a time. It reduces over time.
Having this information, what are the tools and equipment that are used for crypto mining?
To be a crypto miner, you need the following essential things.
Depending on the kind of cryptocurrency you want to mine (Bitcoins, LiteCoin etc) you need to get the program. After downloading your preferred program, you are connected to the network, and this connection takes time; from a few minutes to some hours. The time it takes usually depends on the number of blocks you want to solve before syncing. After connecting, create your wallet and supply your address.
Apart from the software requirements, there are also hardware requirements. A miner requires at least graphics cards, a powerful processor, constant power supply, large memory, a fan and cabling. There are 3 highly recommended hardware for mining and these are Avalon6, AntMiner S7 and AntMiner S9.
Since this hardware and software are available and the know-how is also readily within reach, why aren’t many people involved in crypto mining?
There are a couple of reasons.
The Cost and difficulty.
The cost of being a mining node are quite significant. In the early stages of crypto mining, in particular, the Bitcoins, it originally ran on any computer, then it had to run on fairly high-end computers and processors, then extremely high-end computers before moving to specialized devices. Many existing GPUs are not powerful enough for mining Bitcoins, and other altcoins are moving towards this trend. Thus more miners have to use application specific integrated circuits known as ASICs. Apart from the cost of purchasing these devices, there is also the enormous amount of electricity that is consumed when running these processors.
Aside from the cost of hardware, the difficulty of mining is also a deterrent. To calculate the hash value takes an average of ten minutes.
Mining has a current reward of about 12.5 Bitcoins (Bitcoin mining). This might look like an easy means of getting cash but remember there are a lot of competing mining nodes all over the world for the same reward. Although the number of Bitcoins rewarded is presently 12.5 Bitcoins, this reward will decrease in the future. Every 4 years, the reward is halved. What is more, though in the beginning, cryptocurrency lovers and enthusiasts used to be the primary miners, due to the popularity and the astronomical rise in value several people and more enterprises are investing in them. So in an effort to stay afloat and ahead of the competition, miners have started joining up to open pools.
In view of this Bitcoins are not a good choice for a miner who is just starting out. The cost of initial investment and maintenance, the difficulty(mathematically) and some other factors make it advisable for large-scale operators, not consumer level operators.
There are other altcoins however that are still beneficial to small-scale miners and investors. These include, but not limited to , LiteCoin, Feathering, Dogecoin etc. As more people invest, you might need to switch to an easier to mine cryptocurrency due to the need for expensive hardware and cost of investment.
Crypto mining is a challenging yet exciting aspect of cryptocurrency. As a hobby, it can generate a source of income for you, but it is not advisable to rely on it to make substantial money except if you are willing to invest a significant amount of cash in it. There’s the possibility of your digital currency to jump up in value, though this is a slight chance.I hope this article has made the basics of crypto mining easier to understand.