Cryptocurrency Mining Explained

On more than one occasion, people have asked me “why do you enjoy mining cryptocurrency?” and the answer is simple: seeing how the value of bitcoin (and some altcoins) has been steadily growing, the thought of getting into mining now is attractive when you consider that what you get today can be worth 100 times more.  If you already got into cryptocurrency, chances are you already believe this is possible. However, you don’t have to believe in that to get into mining, since this is also a good way to learn a lot about cryptocurrency. What better way to learn than doing it yourself?

What is mining?

BitCoin mining machine

Over the course of 9 years the cryptocurrency marker has grown exponentially, and miners provide the backbone for the creation and maintenance of bitcoin and other altcoins. They make a series of calculations on a block of transactions. This is a way to ensure that every transaction done follows the rules so things like double spending don’t happen and everything is recorded properly. In more technical terms, miners do the cryptographic heavy lifting (known as hashing) that confirms every transaction made on the public ledger, also known as the blockchain. To make sure that there’s an incentive to do this work miners are paid by the algorithm of the coin for every new block added to the blockchain. For example, the bitcoin network rewards someone every 10 minutes.

Are there rules?

Yes, but it’s more like one big general rule that you have to take into account. Mining is an extremely competitive environment where only one miner is rewarded for finding a new block. Even though there’s “equal” opportunity for everyone to find a new block and get a reward, someone that made a higher investment in hardware has more chances to get it, because he has more processing power directed towards mining. The bitcoin network currently gives a reward of 12.5 bitcoins every 10 minutes to miners that find and add new blocks to the blockchain. However, it is worth mentioning that this time frame stretches out throughout the years when plenty of bitcoins are already in circulation, since there’s a finite supply of bitcoins.

BitCoin mining rules

Because the difficulty to earn bitcoin through mining is always on the rise, the trends changed over the years, instead of mining individually, pooled mining is done. This is a way for miners to increase their chances of get a reward, much like an office lotto pool, you have a higher chance of winning something regularly, even if the payout is much smaller.

How big of an investment is it?

BitCoin Mining Investment

There are two main costs to take into consideration when mining cryptocurrency, the first one being the hardware and software you’ll use to mine, and the other one is the cost of electricity, maintenance, software royalties and if you’re in a pool, the fees associated with it. As for the hardware you’ll use to mine (also known as mining rig) the initial investment can go from £700 to £6000. This depends on how much you’re willing to spend, as a mining rig can be a Gaming PC with a good graphics card, or a DIY rig that consists of up to 18 graphics card connected to a CPU, or, if you have the money for it, an “AntMiner” ASIC machine, which is a piece of hardware specifically designed to mine Bitcoin.

Getting started

Mining is a good way to get into the world of cryptocurrency, and if you have a good computer you can start doing so by finding a good mining pool for mining a cryptocurrency of your choice. However, it’s worth noting that it’s not the best idea to mine with your computer, you can do it, whether you should or shouldn’t is up to you, just make sure to do a lot of research before diving in.

 

Getting started with BitCoin mining

Normally when people think of a mining rig they tend to think of the typical graphics card (GPU) mining rig, which became popular when the value of Ethereum started to rise, because ether proved to be profitable to mine in these systems.  A GPU mining rig is basically a gaming computer, just extra-powerful. Usually these rigs work with up to 18 graphics card arranged together, some miners even invest in making more than one of these rigs and set them up in a space in their house, which is called a mining farm. Even if they’re limited by how many electrical amps the home wiring system delivers, they tend to be a good option that doesn’t require an investment as hefty as ASIC hardware.

You can find plenty of video tutorials that show you how to build your own mining rig, and what custom hardware is needed in order to connect more than 2 GPUs on a computer motherboard, which can be a bit of a hassle for several reasons, but the main one being that one of the necessary parts tends to have a high failure rate because they tend to be rushed into the market. Additional to this you need specialized software to run the rig and learn plenty of software details. All of this can be exciting and fun if you already know your way around building a computer and getting parts, but the whole process can also be quite intimidating for a newcomer.

It’s worth noting that the investment and the choice on hardware depends on whether you’re going to mine bitcoin or altcoins, as mining bitcoins with a GPU mining rig is far from profitable unless you’re in a pool, so take that into account.

Why I love mining

I truly love mining, because it’s a new, exciting and interesting industry that is going through constant evolution. Mining helps me understand a lot of it, and even then, I always learn something new. Additional to this, understanding the relative value of different cryptocurrencies by collecting them myself is a fun experience.

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