Have you been paying attention to the crypto rush in the past few years? Do you want to get on board? Or perhaps, you know very little about cryptocurrencies, and you want to know much more. This article is the perfect place for you to begin by learning how to mine cryptocurrency.
In 2009, the world changed forever with the creation of a digital currency called Bitcoin. But, it did not gain strong recognition immediately.
Over a decade afterward, the cryptocurrency market blossomed and has taken its stake in the way we think about businesses and business transactions. The term mining has evolved from just workers searching for precious minerals in the earth to a digital goldmine.
Bitcoin has challenged the formal structures of how trade and exchange have been perceived. If you want to take advantage of the cryptocurrency move, it is important that you understand just what cryptocurrency is and how to mine it.
What Is Cryptocurrency?
Let’s begin by answering the question, what is cryptocurrency? A cryptocurrency is a digital currency that can be used in the exchange of goods and services.
To simplify things, think of the different currencies that exist in the world. The dollar, pounds, euros, etc., are all currencies that can be used to buy goods and pay for services. They can be converted in value to other currencies as well.
Most regular currencies are regulated by a governing financial body and operate within certain geographical areas and regulations. However, cryptocurrency is different from the regular currencies we know.
Cryptocurrency is digital, and so it is hard to counterfeit or double-spend. The most popular cryptocurrency in the world right now is Bitcoin. In April 2020, it climbed in value to over $65,000 and has remained volatile since then.
The concept of cryptocurrency isn’t new. You will often find companies that have created tokens that can be traded for specific goods and services that the company owns.
That’s the same way cryptocurrencies are operated. You will need to exchange it with regular currency to pay for or access things like goods and services.
How Does Cryptocurrency Work?
Cryptocurrency works pretty much like your regular debit or credit card. The card allows you to use money (currency) in your account and then records the transactions and the balances electronically.
These transactions and the records are kept and managed by financial institutions like your bank and the government. But with cryptocurrency, the transactions and records are decentralized and algorithms handle them.
For a transaction to occur in cryptocurrency, it must happen between peer-to-peer. Both parties must have a cryptocurrency wallet which is used for holding the cryptocurrency and making transactions. To initiate the transactions, a private key is created and used to complete them.
After it is completed, it is broadcasted on the cryptocurrency’s network and recorded on a public ledger called blockchain.
What Is Crypto Mining?
Crypto mining is different from the physical mining of precious stones or minerals. It is the process where cryptocurrency transactions are recorded on a public ledger.
The process involves certain users trying to solve a cryptographic puzzle using software that allows them to add a block of transactions to the ledger (hence the name blockchain). The first person who solves the puzzle gets rewarded with newly mined coins.
They are also paid the transaction fees gathered from the persons who created the transactions in the first place.
How Long Does It Take to Mine Cryptocurrency?
Considering the value of one Bitcoin and some of the other altcoins circulating in the market, you would wonder how long it would take to mine cryptocurrency? Several factors, including the computing power of the software, the type of equipment, and how many people are competing on the transaction, affect the duration of mining.
Ideally, it can take about ten minutes to process one Bitcoin. This may look simple, but it isn’t exactly possible for a lot of miners.
This ten minutes could equate to nearly 30 days with a fairly large setup.
Can Anyone Start Mining?
Anyone can start mining cryptocurrency anywhere. It’s the beauty of the decentralized system of cryptocurrency. In the early years, anyone could mine crypto using their regular stay-at-home computers.
But that isn’t the case today. To mine and earn good cryptocurrency, you will need to invest in powerful computer equipment like the GPU and ASIC.
How Much Do Miners Earn?
Miners make a lot of money from mining cryptocurrency. However, with Bitcoin, the rewards for mining are cut in half every four years. In 2009, mining a block would have earned you around 50 Bitcoins.
But as of May 2020, the reward for one block is about 6.25 Bitcoins. When you consider the value of one bitcoin, that is still a lot of money and a worthwhile venture to embark on.
4 Steps To Mine Cryptocurrency
Mining cryptocurrency is a profitable venture anyone can invest in and reap from. If you are interested in entering the crypto-gold rush, here are the steps you will need to get started and earning:
Step 1: Purchasing Computer Software
You should start by purchasing the right computer software to facilitate your mining. There are different types of cryptocurrencies, and some require different types of software and hardware. However, they generally come down to two main types:
- The GPU (Graphics Processing Unit)
- The ASICs (Application Specific Integrated Circuits)
ASICs are best for mining Bitcoin. If you choose to use a GPU to mine Bitcoin, you may wait years and years before you can mine one Bitcoin.
ASICs are much faster and can deal with the complex nature of Bitcoin mining better. GPUs are great if you consider mining other cryptocurrencies such as Ethereum or BitcoinGold.
They are still slow at mining, but you can easily find them at any place where computer equipment is sold. Whereas ASICs are more expensive and not as easy to procure.
You may wonder if mining on a mobile phone is possible. Well, yes, but it may not be your first option over more complex software and hardware.
Android phones are quite capable of mining but will not deliver the results you will get when mining is done with the software and hardware we’ve discussed.
Step 2: Cooling System
Mining cryptocurrency requires a lot of energy and power. The machines and hardware will constantly be working, and as a result, a lot of heat is produced.
If you are familiar with your regular computer device, you may notice that it comes with a cooling fan. This keeps the computer from heating while you use it to work. If the fans are not in place, your computer will most certainly be destroyed.
It’s the same with machines you will use for mining. Overheating will damage the equipment, and that would mean losing the money you invested in purchasing them.
You must set up a cooling system for the machines you use.
Step 3: Mining Softwares
Different from the hardware component you will need for mining crypto, there are important software you must obtain as well. Many of these mining software options are free, but each of them comes with its requirements, pros, and cons. The top three mining software you should consider are:
CGMiner has been around for a while and offers great features as well as being compatible with cross platforms. It can detect new blocks and is compatible with ASICs.
BFGMiner is a customizable mining software that comes with great clocking and monitoring functions. It is written in C and so can run on virtually any operating system as well as being compatible with ASIC.
EASYMiner makes mining much easier. Most mining software is command-line tools. But EasyMiner is a graphical software and open-source as well. But EASYMiner works only on Windows.
Step 4: Join a Mining Pool
A mining pool is a collection or a group of miners who are working together to increase their chances of mining a block at the group level. Naturally, as an individual miner, there are already enough competitions for new blocks on the network.
So a mining pool pulls the resources and capabilities of different miners into one. This increases their output, and when the mining is successful, the rewards are shared.
Think of it this way, if it would take you 60 days to mine two Bitcoins, you would mine the same amount of Bitcoin in one day if 60 miners were doing the task. You would end up achieving more in a shorter period, and the profits are shared.
There are many pools you can join. You may want to look out for their fees, country of origin, and the reputation they have so far.
Things to Keep in Mind
Asides from the necessary software, hardware, and team set up to mine crypto; there are some other things you need in place. They include:
The first thing to keep in mind is that the difficulty levels in getting crypto will continue to increase. And the more it increases, the amount of crypto you can get will also decrease.
As mentioned before, the value of a bitcoin will reduce by half every four years, and this is due to an increase in mining and an increase in the difficulty levels of mining.
Having the right equipment and software is great for mining, but timing is another important factor. Remember that the rewards of a new coin are given to the first miner who solves the puzzle or comes close to doing so.
What that means is, you may end up solving the puzzle and not get a reward because you were not the first to do so. Luck and timing are important in crypto mining.
Great effort and persistence are needed to mine cryptocurrency. You must prepare your mind to treat crypto mining the same way you treat running your regular business.
In Bitcoin, you can only verify one Mb worth of transactions to earn a Bitcoin. What does this mean for you?
With this size limit, the network can only process a maximum of about seven transactions per second, and each Bitcoin transaction is small (roughly a few hundred kilobytes).
Start Your Crypto Journey Now
The world of cryptocurrency is a fast-paced one with lots of opportunities for traders and miners alike. More and more people are getting in on the action.
This means that the window of opportunity and the ease of mining gets slimmer and slimmer. The best time to become a crypto miner was ten years ago.
The second best time is now. But don’t jump in without ticking all your boxes.
Work with a financial advisor to make sure you are best prepared to start earning from mining cryptocurrency.
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