Are you thinking about setting up your own crypto mining empire? Bitcoin and some other digital coins have gained a considerable number of followers over the past several years. With this escalating popularity of cryptocurrencies, more and more crypto enthusiasts are looking for ways to reap profits through digital gold or virtual silver. One way of entering the crypto world is investing in promising digital currencies such as Bitcoin. The other option is acquiring these coins for free through the mining process. Unlike its name, the process of mining cryptocurrency has nothing to do with the traditional mining practice.
In the world of cryptocurrency, the process of mining refers to the way in which transactions in Bitcoin are confirmed and added into the public ledger, known as the blockchain. It is through the mining process that new digital coins are generated as a byproduct. Basically, cryptocurrency mining is a form of digital bookkeeping where a miner solves “blocks” to verify transactions and gets paid for it in return with a fraction of cryptocurrency.
A block contains cryptographic signatures and there’s a difficulty value attached to the solution for a block which keeps on changing over time. The mining process works like a competition where each participant competes to solve the puzzle first and receive BTC tokens as a reward.
Mining can be a great option to make money or have an alternative stream of revenue. But it is profitable, only if you approach it in the right way. So, before you jump into this field, it’s necessary to understand how it works and what are the things involved in this process. If you want to acquire some crypto coins or tokens without having to pay anything, you need to first know a few things. For mining cryptos, you need to know the hashrate of the mining hardware, the current difficulty of the Bitcoin network, as well as the amount and cost of electricity associated with mining hardware. Now, let’s take a look at essential items you need to successfully mine a digital coin.
Just like you need some tools and equipment for mining minerals from the ground, you will need a device to mine cryptocurrencies. You need a computer to mine these virtual currencies but here the processing power of your computer plays a fundamental role. In the beginning, CPU was used for mining Bitcoin but later some other advanced options emerged to secure the network and earn more digital coins.
To overcome the issues faced while using CPU, GPU – which is found in your graphics card, was found to be more efficient at bitcoin mining. The Graphical Processing Unit has increased the bitcoin mining power by 50 times to 100 times, in addition to reducing the amount of power used per unit.
The increasing popularity of bitcoin gave way to the development of mining hardware dedicated to mining digital coins only. In just a few years, miners moved from GPU to the Field Programmable Gate Array (FPGA). This time the transition doesn’t result in a 50x – 100x increase in mining speed but significantly improved the power efficiency and ease of use. It was with the development of FPGA that a full-fledged mining industry came into existence. As compared to 400w of power consumption by a 600 MH/s graphics card, a typical FPGA mining device produced 826 MH/s hashrate at 80w of power.
In the quest for something far more speedier than GPU, the Application Specific Integrated Circuits or ASIC came into existence. The sole purpose of designing an ASIC chip is to mine Bitcoin. It can’t perform any other task because an ASIC is intended to do a single task only. Since these devices are manufactured to mine Bitcoin, it offers a 100x increase in hashing power, as well as low power consumption as compared to all the previous technologies. So, if we look at the generations of mining hardware, first it was CPU which was replaced by GPUs which were in turn replaced by FPGAs and then finally came the ASICs. This means ASICs are the latest and most powerful mining hardware available today.
Your mining hardware is of no use without a stable internet connection. In fact, your mining performance largely depends on the quality of your Internet connection. If you want consistent data transfer, it’s best to consider a wired Internet connection.
Next, you need mining software which allows your computer to connect to the cryptocurrency network. Depending on the operating system your computer uses, you need to choose the right mining software. There are different ways to mine a cryptocurrency. You may do it on your own or join a mining pool or mine with Bitcoin cloud mining or opt for mining colocation.
Finally, to keep your hard-earned virtual coins safely, you will need a wallet. And for your digital coins, you need a digital wallet which can safely send, receive, and store your coins. There are different types of Bitcoin wallets, so make sure you research about each one before deciding on which wallet to use.