What is Crypto Mining?
Crypto mining refers to the process used to generate new digital currencies and verify new transactions. It is done so by solving extremely complicated mathematical problems that verify transactions in the currency using a decentralized computer network. An individual or group that uses computers to participate in blockchain processing to generate coins is a crypto miner.
Mining is done using sophisticated hardware. Computing hardware on the network receives new coins in exchange for providing their processing power. They maintain and secure the blockchain to receive or earn the rewards in the form of new tokens. A blockchain is a decentralized ledger that helps in recording and distributing transactions in multiple computers of a network. These transactions are secure and impossible to edit.
Crypto mining is painstakingly hard, high power consuming, and highly costly but at the same time very appealing for miners who consider it as a winning lottery.
Bitcoin (BTC), Ethereum (ETH), and Tether (USDT) are some popular cryptocurrencies.
Primarily, there are three ways you can get cryptocurrency from:
- You can buy them on exchange.
- Receive them as payment in return for the services or goods.
- You can virtually mine them.
In this article, we will explore crypto mining in detail.
How to Start Mining Crypto
Well, you might want to try your luck in crypto mining. A decade ago, everyone with a normal computer would participate. But as the blockchain is growing, more advanced computing tools are required to mine new crypto coins. So mining is one heck of a professional work now. All mining is now done by a team of professionals with a network of highly advanced computing hardware and software.
- To start mining crypto, you’ll need a crypto wallet, mining software and mining hardware. The equipment you need is quite expensive. However, the more efficient your hardware is more effective the results will be.
Proof of Work
Cryptocurrency mining involves validating crypto transactions on a blockchain network and posting them to a distributed digital ledger. Mostly these digital ledgers, the bitcoin ledgers, for example, only allow documented miners to update the ledger. This is termed the proof of work (PoW). Digital platforms are easily manipulated, so it is the responsibility of the miner to secure the network from double-spending. Miners essentially receive crypto coins as a reward for verifying and securing the blockchain.
- To earn new coins, miners need to deploy their computing systems for solving complex mathematical problems to guess a 64-digit hexadecimal number known as “hash”. Hence, the faster a computer generates a guess more the chances of the miner getting the reward.
Miners combine their computational resources to increase their chances of finding and mining blocks on a blockchain, making a mining pool. In the case of winning, the reward is distributed among the miners corresponding to the resources they pitched in. Moreover, many crypto mining applications come with their mining pools, and miners are free to change their pools if they want to. There are many official mining pools available, laced with technical support and regular updates.
Different Ways of Mining Cryptocurrencies
- A decade ago, miners could use their regular CPUs to mine coins. But with the growth of the blockchain network, it has gone impractical now.
- Graphics processing unit (GPU) mining is another mining method. Computational power is maximized in this method by setting a network of GPUs under one mining rig along with a motherboard and a cooling system for mining. GPUs must always be connected to a secured internet.
- Application-specific integrated circuit (ASIC) mining is another method of mining. ASIC miners produce more cryptocurrency units, but they are expensive. With the growing difficulty in mining new coins, the expense of ASIC units will be high, making them obsolete.
- Cloud mining is getting increasingly popular method due to the increasing cost of GPU and ASIC mining. It allows individual miners to access the computing powers and crypto-mining facilities of big companies. Individual miners can opt for free or paid cloud services for a specific amount of time. This is the go-to form of mining.
Is Crypto Mining Legal?
Due to rather less involvement of government agencies in mining crypto coins, this question naturally comes to mind. It is legal in many countries, including many states of the USA. However, the jurisdiction of some countries like Pakistan, Bangladesh, Algeria and Colombia prohibited the mining of crypto coins. It is advisable to check the legality of crypto mining in your country before giving it a try.
Some Crypto Facts
- The first cryptocurrency was named Bitcoin, and it was invented by an unknown person called Satoshi Nakamoto in 2008
- To mine one crypto coin, mining a bitcoin, for example, takes 1449kWh of energy.
- Only one MB of data can fit into a single BTC block.
- There will be a total of 21 million BTCs existing in the world.
- The last bitcoin is anticipated to be mined in 2140.
- Cryptocurrency is taxable.