In the traditional financial system, banknotes are issued by the central bank. According to BBC News, the US prints nearly seven billion notes per year. Unlike cryptocurrencies, it demands a “mining” process to earn new coins. Cryptocurrency mining, or crypto mining, is defined as a process of verifying and adding transactions of various cryptocurrencies into the Blockchain public ledger. Bitcoin is the notorious example of mine-able cryptocurrency. As everybody in the cryptosphere is aware, it has neither any authorities to create the coins nor accountants to record all the transactions that have taken place in its network.
How are new Bitcoins created? And how are transactions recorded and verified?
The answer is the mining process.
How Does Cryptocurrency Mining Work?
Crypto mining provides two functions: (1) adding transactions into the blockchain (verifying and recording) and also (2) releasing new cryptocurrencies. Anyone with the best mining machine and a good internet connection can become a miner , or refer themselves to the network node that processes the transactions and systematizes them into blocks.
Let’s take a step-by-step look at how crypto mining works, just to be sure you get a clear vision about this topic.
First, miners must solve a complex set of algorithms (hashing process), also known as “Proof-of-Work” so as to add a block of transactions to the blockchain. Once transactions are made, all network nodes collect them and verify their validity.
Next, miners gather these transactions from the memory pool and begin assembling them into a block. To form the neighboring block, the information from the previous block is used to connect and proceed with the data available to solve the next complex algorithms. These same processes are imposed for forming a new block.
What Do You Need to Start Mining?
What do you need to start mining cryptocurrencies and what are the steps involved to do so? To clarify, we have assembled a few necessary and most significant hardware and software you may opt for, including method of the mining as below.
Firstly, you must have the greatest and most efficient mining hardware. Originally, cryptocurrencies can be mined on CPUs (laptop or desktop computer). Yet, it is noteworthy to mention cryptocurrency mining is competitive, especially for Bitcoin.
As cryptocurrencies gain higher popularity and Bitcoin mining is a booming industry, the blockchain’s mathematical algorithms (cryptographic puzzle) become arduous. Not long after that, miners figured out they could get more hashing power by using graphic cards (GPU).
At present, as the cryptographic puzzles get more challenging, it is getting harder for miners to solve and higher the electric power consumption for miners to mine Bitcoin, GPUs were surpassed by ASICs. ASICs (Application-Specific Integrated Circuit) are new-age integrated electronic circuits which offer higher performance with lower electric power consumption ― exactly perfect for mining cryptocurrencies.
Here are the topmost mining hardware you may choose:
1. Bitmain Antminer S9i
2. Halong Mining DragonMint T1
3. Bitmain Antminer T9
4. Pangolin Whatsminer M3X
5. Bitmain Antminer R4
7. Bitmain Antminer S7
Next, if you are intended on mining Bitcoin, get yourself the Bitcoin Wallet to receive mined coins. Bitcoin will be sent to the wallet by using the generated unique address.
A further step is to download the mining software which can help you effectively mine cryptos. There are a number of programs available to help you manage your cryptocurrencies mining. Most of the programs are open-source and free. CGMiner and BFGminer are the most significant Bitcoin mining software.
For other cryptos, as in Ethereum, GETH and Ethminer are the greatest mining software to earn Ether. Once the software is successfully downloaded and configured, easy peasy lemon squeezy, you can start mining cryptos!
Method of Mining
Subsequently, you can choose whether to mine solo or in a group, also called as ‘Mining Pool’. What is called Mining Pool is a joint group of cryptocurrency miners who share their processing power over the network and split the reward equally among everyone in the pool, according to the amount of work they contribute to the probability of presenting valid PoW.
Not all cryptocurrencies are mine-able without forgetting that mining is not always profitable, depending on several factors as provided below.
- Cryptocurrency you are mining;
2. High-speed Internet connection;
3. How fast your computer is;
4. The electricity cost in your area.
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A keen researcher who believes in enriching her knowledge. For Shuhada, the crypto world intrigues her sense and offers plenty of high delicious 'crypto cuisines'.