People are interested in cryptocurrencies, and more and more of them are investing in them. But even among people who trade cryptos often, there aren’t many who understand the technology behind it. This is because cryptocurrencies are mostly used as a speculation tool.
People who only care about making money don’t care about much else. You don’t require much technical knowledge to begin trading, but we think it’s good to know the basics. Education will eliminate uncertainty and doubt, which still make up a big part of how most people think about Bitcoin and other cryptocurrencies.
What’s crypto mining?
Mining is a distributed consensus system at its core. It’s a way for people worldwide to work together to keep crypto networks running. Mining is the process of verifying transactions that will wait to be introduced to the blockchain database. Proof of Work blockchains, like Bitcoin’s, need mining to work. Most of the newer blockchains use Proof of Stake and other ways to reach a consensus, and they don’t need or let you mine.
On the Proof of Work blockchains, mining sets the order of transactions in time, which is important to ensure that previous entries in the “open ledger” can’t be changed. If a transaction is confirmed and added to the blockchain, it must be put into a block that follows strict encryption rules.
Those are checked and approved by the miners on the network, and the government has nothing to do with it. This keeps the Bitcoin network from being biased in any way. We can quickly compare this to how credit cards are used in the old electronic money system.
The credit card company has to check and record every payment (for example, MasterCard or Visa). We could say that all the money that moves through the modern banking system is recorded in centralized systems, which are very easy to change.
How to Mine Cryptocurrency: The Basics
You probably know what gold mining is and how it works. We have to do a certain amount of work to get the raw materials that people think are valuable. Bitcoin isn’t too different in that way, except that it’s a completely digital resource, so the mining process happens in the virtual world.
Gold is easy to get, but the process can be volatile and hard to predict. It’s about the same as mining cryptocurrency. When the cost of mining one ounce of gold (labor, wages, and equipment) is less than the value of that ounce of gold, there is an economic reason to mine gold.
There are some small differences between Bitcoin and other currencies. Miners are finding new Bitcoins at pre-set levels of difficulty that are getting harder and using more energy. When the costs of mining Bitcoin (electricity, computing power) are less than the value of the rewards, there is an economic reason to mine Bitcoin.
How to Mine for Cryptocurrency
What is cryptocurrency mining? You know now. You could even be required to try it out for yourself. So, let’s look at the tools and steps you need to set up a home mining operation. Prepare your shovel!
Getting the right computer hardware is the first step to mining Bitcoin. Your chances of success go up with a faster, more powerful computer. In theory, anyone should be able to mine cryptocurrencies. You need to run software on your computer that helps you mine. But you’re not likely to make much money without doing some research.
In the first few years that Bitcoin was around, it was enough to use regular home computers and graphics processing cards made for consumers. But in recent years, this has become mostly ineffective. The rise of application-specific integrated circuits made for mining was a big part of the problem.
ASICS only does the specific kinds of computations needed for crypto mining. These devices are loud and hot, so they are not good for homes. But if you want to get rich by mining Bitcoin, you should be ready to spend a lot of money on special equipment.
In 2016 and 2017, Ethereum became very popular because it made it possible to make a lot of money by selling coins from home computers. This, along with a growing market and a lot of money, made Ethereum very popular.
Miners soon realized they could make more money by putting together more GPU units. So, mining farms were built where electricity and computer equipment were cheap. Many people became rich because of these farms. Some coal companies even rented their computers to people who didn’t work. Because Bitcoin mining is becoming increasingly popular, some people have also started working together in groups called “mining pools.” This makes it more likely that they will get the reward.
Where to Start
Equipment used for crypto mining needs to use as little electricity as possible. We always try to find the best balance between price and quality. If you are required to start mining cryptocurrencies, you should know that the price of electricity will likely make it hard for you to do so.
This is called solo mining, but it is better to join a mining pool or a group of people who work together to mine cryptocurrencies. How did the word pool get started? Think of computing power as water and the Bitcoin network as a big body of water.
Those with the most water will have the best chance of winning. The most water most people have is a small bucket. So, they gather and put all their water in a pool. If their pool wins a prize, it will be split based on how much water each person puts in.
So, people who are just starting should join a mining pool. But be careful and only join well-known pools. Even if you have the best hardware for mining cryptocurrencies, it won’t work without the right software. Setting up the software takes a lot of technical know-how, so this process is for people with more experience.
How to Get the Rewards
Once your mining software and hardware are set up, you can start mining immediately! But you might be wondering how you will get the money you might make. Bitcoin is the most cryptocurrency in the mining community, so that’s how most payouts are made.
You probably already understand that you can’t store Bitcoin in your bank account, so you’ll need a crypto wallet. You made a great choice with your Kriptomat wallet. The mining software will send any rewards you earn to the address you give for your crypto wallet.
Crypto mining has a cost: it uses a lot of electricity. The mining equipment always works at full speed, which wastes energy as extra heat. Because of this, many big mining operations are in the north, where it is easier to keep the cost of electricity for cooling down low.
It is tough to recognize exactly what effect Bitcoin mining has on the environment. But it is clear that crypto mining, especially Bitcoin mining, has added more heat to the world’s warming than many countries. Depending on how electricity is made, mining can also make greenhouse gasses.
Until Next Time
Dominus Owen Markham