Cryptocurrency mining is the process by which new cryptocurrencies are generated. There are various components involved in the mining process – and while it may appear to be a complex and technical process, it is actually quite simple! Here’s a beginner’s guide to cryptocurrency mining which will help solve many doubts of those who are new to mining or are planning to begin with cryptocurrency mining.
The Four Key Components of Cryptocurrency Mining:
The process of mining involves setting up of a hardware device – which will be responsible for the actual mining activity. A software also needs to be set up which will allow the miner to understand the performance of the hardware. However, a single miner mining with his personal mining rig does not have enough mining power – hence, one needs to join a mining pool. Finally, once the block reward comes out – miners get their mined cryptocurrency sent to a cryptocurrency wallet.
Let us take a closer look at these key elements which are involved in a mining process:
Cryptocurrency Mining Hardware
The process of cryptocurrency mining is a four-step process but the most basic component that it involves is that of the mining hardware. A mining hardware device is what actually does the processing. While it is possible to mine certain cryptocurrencies using nothing but a CPU, it takes a lot of time and is not worth the effort anymore. Most cryptocurrencies are now mined by GPUs and some using ASIC devices. The higher the hashing power, the faster a currency is mined.
AMD and nvidia are the leading names when it comes to the GPU business and Bitmain’s AntMiners are among the best ASIC Mining devices. There are a number of things that need to be kept in mind before you purchase a mining hardware – how much electricity does it consume, does it heat up easily, how much hashing power does it provide, etc. Moreover, considering that mining difficulty keeps increasing with time, it is always advised to get the latest cryptocurrency miners so that yours doesn’t get outdated soon.
Cryptocurrency Mining Software
After selecting the cryptocurrency mining hardware the next thing that one needs to determine is the mining software. Cryptocurrency mining software acts as the link between the hardware and the user. This software shows how effective the mining hardware is performing. The mining hardware often tends to heat up or slow down – which will be conveyed to the user with the help of the mining software.
A mining software is critical because it alerts the users if there is a flaw with the mining hardware that needs to be corrected – for instance, something like overheating. These software come in graphic as well as command-line interface and come for Mac, Windows and Linux users – all one needs is to select just the perfect kind of a software that will allow them to monitor their mining operations.
Cryptocurrency Mining Pools
Cryptocurrency mining pools are a critical element of the mining operations. A pool is basically a group of users who come together and pool-in their resources to mine. It is a hard task to mine for cryptocurrencies alone as it requires a really high amount of processing power. Shared mining activities ensure that a number of miners are mining together – and that they are rewarded on the basis of their contribution.
A mining pool can be selected based on a number of factors. It can be selected based on the kind of payout options they allow, or on the basis of the fees that they charge. Almost all pools have a different mechanism when it comes to sharing the mined cryptocurrencies. All of these factors need to be kept in mind. One also needs to check if the pool is credible enough and has been running for at least a couple of years.
The fourth and final element that needs to be kept in mind is that of cryptocurrency wallets. Cryptocurrency wallets act as bank accounts in the crypto-world. Instead of an account number, wallet holders get a ‘wallet address’- where they can deposit their cryptocurrencies and store them. There are various types of cryptocurrency wallets which you can choose – the biggest difference between each of these wallets is how they store the private keys.
Hardware wallets are typically considered the safest because they are an external device which offer maximum protection for the users. There are a number of different kinds of wallets such as paper wallets, web-based wallets, exchange-wallets, etc. Most cryptocurrency exchanges offer their own wallets. For those dealing in a high volume of money, hardware wallets are an absolute necessity!
Conclusion: Mining vs Trading – Why Should You Mine?
With cryptocurrency markets on a recovery of late, the crypto-craze seems to be making its way back! While many traders and investors were disheartened over the recent drop in cryptocurrency prices, the recent bullish momentum has been a strong ray of hope. This crypto craze not only involves cryptocurrency trading, but cryptocurrency mining as well.
The one thing that people need to keep in mind before they begin mining is that it is an expensive process. Miners need to understand that the cost of the equipment and the cost of the electricity would need to be borne by them much before they start making a profit. Regarding profitability, there are a number of cryptocurrency mining calculators which can allow you to easily calculate your mining profitability – based on your hash rate and the cost of electricity in your area.
For those who do not want to invest a large amount – trading is perhaps the better option. However, over the long run, mining becomes self reliant as it pays off for itself once the profits start rolling in!
Author: Prince Kapoor is Independent Marketing Analyst and Blogger. While not working, you can find him in gym or giving random health advises to his colleagues which no one agrees on :D. If you too want some of his advises (on health or on marketing), reach him out at @imprincekapur