Mining cryptocurrencies is one of the main ways people make money in the blockchain space. In fact, cryptocurrency mining has remained popular ever since Bitcoin was invented by Satoshi Nakamoto and his team in 2009. Simply put, cryptocurrency mining is the process by which people get cryptocurrency after doing some computational work.
Main Ways of Cryptocurrency Mining
There are two main types of cryptocurrency mining, hardware mining and cloud mining. First, mining requires specialized computer software, which is used to solve encrypted mathematical equations.
For example, in the early days of cryptocurrency mining, people used CPU mining. However, this method is too slow, and it takes a long time to mine even a small amount of cryptocurrencies such as Bitcoin. CPUs also consume a lot of energy, making them expensive and unprofitable.
Currently people are using specific GPUs. With this approach, miners can use a set of GPUs to boost their computing power, thereby increasing their cryptocurrency mining capabilities. Despite this advantage, the GPU still needs to provide reliable power and stable internet service at all times.
Also, due to the high heat generation, mining machines need to be equipped with cooling systems. Some miners also form mining pools to increase their computing power, so that a large amount of cryptocurrency can be mined in a short period of time.
On the other hand, one can also use ASICs to mine cryptocurrencies. Since ASIC miners are specially designed for cryptocurrency mining, their output levels are higher than dedicated GPUs. Specifically, ASIC miners refer to some mining equipment that uses microprocessors to mine cryptocurrencies. However, each ASIC miner generally supports only one cryptocurrency mining.
Cloud computing power mining
Because the cost of mining with ASIC or GPU is too high, people start to choose cloud computing power for mining. First, cloud computing mining enables people to mine cryptocurrencies without any equipment or specialized mining knowledge. You rent a certain amount of computing power (hash rate) in a remote data center over the internet and are rewarded in cryptocurrency. Some services lease not only computing power, but also physical equipment units (ASICs) and then buy back or transfer ownership after the lease expires. There are platforms that buy and sell computing power from individuals, such as Nicehash.
For details, please refer to the 2022 cloud mining article
Cryptocurrency Masternodes
What is a masternode? A master node refers to a node that performs other special functions including a transaction intermediary, and is one of the nodes of the cryptocurrency network. Its most prominent feature is that investors who invest in a specific master node can, after a certain period of time, return the rewards (interest) generated in the corresponding node in the form of the cryptocurrency they invested in. The master node guarantees a stable ROI (Return on Investment). ROI is a financial term used to measure the efficiency of investment and investment methods. A high ROI indicates a high return on investment and a high recovery value compared to the cost input.
Some blockchain ecosystems, such as DASH, require masternodes to run the system. This is the name of the main node of the network, which has been given special powers. When new blocks are created, masternode owners will receive the same rewards as miners.
To run a master node you need:
- Buy a certain amount of coins and freeze them in a local wallet or hardware safe.
- lInstall and configure software on your PC or remote server that ensures the master node is running.
Maintaining a masternode is generally not a form of mining, but an investment in cryptocurrency. You only use one coin and are completely dependent on the profitability of the project.
Mining algorithm
“Currently, mining algorithms are mainly divided into two types, namely POW algorithm that requires a lot of hardware resources for calculation, and POS algorithm that does not need to use a lot of hardware resources for calculation, but requires coin mining.
PoW (Proof of Work)
Encryption algorithms set parameters for creating cipher blocks, but do not fully guarantee the integrity of the network. Miners and coin owners are members of the network and can change the blockchain by generating new blocks and conducting transactions. To control changes in the ecosystem structure, a special consensus algorithm is used. Most networks use Proof of Work and Proof of Stake.
PoW, or also known as "Nakamoto Consensus," guarantees a fair distribution of assets in the network, protecting the blockchain from potential threats. The profit of miners depends on the computing power of the equipment. If the hardware hash rate is equal to 0.1% of the network power, then you are likely to create 0.1% of encrypted blocks and be rewarded accordingly. Miners process transactions by including them in new blocks.
PoS (Proof of Stake) is a distributed consensus solution based on investment opportunities. Its essence can be expressed as: "money to make money". Your profit does not depend on the computing power of the mining farm, PoS algorithm does not need it at all, but depends on the amount of coins in the wallet. The only condition is the constant synchronization of encrypted storage with the network. And the longer the asset life, the higher the dividend. All these properties are embedded in the program code.
How to start mining yourself
Step 1: Prepare mining machines and mining pools
If you want to mine Bitcoin, you must prepare professional equipment. At present, there are many professional mining machines on the market, and mining pools are also essential. When choosing a mining pool, you should also compare each mining pool. The output and income gap, and then choose the most suitable mining pool.
Step 2: Register a mining pool account and set it up
After preparing the mining pool, it is necessary to register a mining pool account and set a common email. When setting up a miner account, each CPU or GPU needs to set a miner account.
Step 3: Download the Bitcoin Miner
After registering and setting up an account, you need to download a bitcoin miner. When downloading a miner, be sure to choose a miner that can maximize the performance of your CPU and graphics card. After downloading, set the server, username, password, device, etc.
Step 4: Buying a Power Supply with Power Reserve
Almost everything still requires buying power buttons and monitors to start and configure rigs, build farms, install operating systems and crypto mining software.
Step 5: Mining
After setting up the mining machine, click the "Start Mining" button, the mining machine will enter the state of full speed operation, and the mining machine will automatically start mining.
Platforms and Services Beginners Need
Those who mine bitcoin or ethereum probably don't need a market unless they trade in crypto to increase profits. However, you can only exchange digital coins for traditional currencies on exchanges or online exchanges. Recommendations and services of cryptocurrency exchanges are on our website.
Post time: Sep-16-2022