Everything You Need to Know about Cryptocurrency Mining
What is Cryptocurrency Mining?
Cryptocurrency mining is a method of generating new coins by decoding highly complicated cryptographic mathematical equations. Those who mine them are called miners.
Whenever a crypto investment happens, a miner is required to verify that transaction. Once the verification is done, the transaction is registered in the decentralized virtual public ledger, i.e., blockchain, and is marked completed.
Every miner can verify such transactions, and they compete for that as the one who gets to do it — gets rewarded with the crypto. This entire process is a part of cryptocurrency mining.
Benefits of Crypto Mining
- One of the most significant benefits of mining is maintaining authenticity and preventing digital currency’s double-spending.
- It also helps regulate & maintain the blockchain network’s system.
- It can earn you some really massive figures if you get lucky.
How Does Cryptocurrency Mining Work?
The system setups that are set to mine cryptos are called rigs. Mining rigs need to have high-power systems — the higher the power, the higher the chances to succeed.
It is not always guaranteed the miner will get coins. Coins come as rewards, and rewards happen when you successfully add a block to the blockchain network.
Cryptocurrencies like Bitcoin, Ether, etc., are made with the help of blockchain development services. It is a virtual ledger where mining and crypto-related transactions get recorded.
All in all, the miner first needs to mine the crypto. Post-mining, the miner needs to verify, and once done, she can record it in the decentralized virtual public ledger.
How is Cryptocurrency Mining Done?
Cryptocurrency mining is a very time & energy-consuming task. It can even take years to mine and get nothing in the end. The miner also needs to have a highly-powerful computer or multiple computers and lots & lots of electricity.
Shockingly, it takes around 72 terawatts of electric energy to produce a single Bitcoin via the ASIC method in 10 minutes. 72 terawatts = 72000000000000 watts!!
Miners from all over the globe race to crack the mathematical codes. The one who gets it done first gets rewarded in crypto, often in Bitcoin. And the current value of Bitcoin is $44,474.
PoW is a decentralized consensus mechanism that offers crypto miners a random mathematical puzzle to test and validate the authenticity of the entire crypto network system.
Almost all cryptocurrencies, including Bitcoin, use PoW in the mining process to conduct secure peer-to-peer transactions.
There is another & only alternative to PoW, i.e., Proof of Stake (POS).
Basically, Proof-of-Work is for testing the abilities of the miners and preventing any kind of counterfeit in the crypto world.
Methods of Crypto Mining
There are different methods or ways to mine cryptocurrencies, depending upon the miner’s budget and potential to spend. Below they are:
CPU mining is the most basic way to mine — for this method, you don’t need to make any special arrangements as it can be done on any computer.
Miners used to mine using this method when the crypto began in 2009. But after the crypto’s hike, home computers become useless.
If you mine on a CPU system today, it will take months, if not years, to fetch a fraction of digital tokens. You will end up in a massive loss.
GPU mining is one of the most popular ways to mine cryptocurrencies. They are considered high-power computers as compared to CPUs.
Today, a group of GPUs with a cooling system can be a starting point in the crypto-verse as they can function as a basic mining rig. Even GPUs can take months to get success in mining.
ASIC mining is the most expensive and highest method to start mining. These systems are specially designed for mining.
Undoubtedly, they are the fastest among all the ways, but their expenditures are sky-high. Not everybody can afford ASICs.
The cloud mining method is the latest form of mining as miners find it feasible. Cloud mining is when power & systems can either be borrowed from the big companies or rented at affordable prices.
Mining pools are a form of group mining where miners combine their resources and use them altogether to mine cryptos. When any profit arises, they distribute it evenly.
Mining pools is the biggest form of mining as it enhances the chances and decreases the cost & time.
How Much Does it Cost to Mine Cryptocurrency?
The cost of establishing a rig or crypto mining varies from country to country & system preferences as it depends upon three major factors: cost of electricity, time consumption, & system expenses.
Still, to give you an example — in the USA, Bitcoin mining would cost $55,000, and as it was a successful mine — the reward received was 6.25 Bitcoins which is worth $268115.99 (as of now).
The potential of this market is clearly visible. Meanwhile, if time & luck is in your favor, you can be rich.
Is Crypto Mining Legal?
It is one of the most debated talks of these times as nobody has a specific opinion on this matter yet.
The cryptocurrency development company legality varies country-wise — it is legal in the USA and some other countries. You need to check in your country whether it is legal or not.
These days cryptocurrency mining & market are one of the most fascinating & trending topics on the internet.
More & more people are getting attracted to it and want to join. But due to its complex & volatile nature — many people are still struggling to get a clearer picture.
The upcoming days will be crucial for the cryptocurrency’s future as governments will have a specific decision about them.