If you’d like to find out how crypto mining works, you’ve come to the right place. Many people are interested in it, but find it difficult to understand how it all works, what kind of hardware and software is needed and, most importantly, whether it pays off. You can’t blame them. We are still getting used to the concept, but the fact that cryptocurrencies are here to stay can’t be overlooked. So, take a look at this detailed manual for beginners and you’ll hopefully understand how mining works.
First things first
In order to start mining cryptocurrencies, you need to have the right equipment in terms of hardware. First of all, you need a crypto wallet, a strong Internet connection, a high-end computer (which should be located in a cool room). Next, you need to select the cryptocurrency you want to mine. Since Bitcoin is still the most popular one, we recommend getting reliable Bitcoin mining hardware.
If you wish to mine solo (and that’s not the best idea), you should download the whole cryptocurrency block-chain, which might take days. Once you get a mining software package, we recommend you join a mining pool, where you’ll be doing the mining with other people.
As we’ve already said, you need a type of hardware that is best for mining a particular currency. Some of them don’t require dedicated hardware and graphic processing units (GPUs) are good enough to process the transactions. GPUs are slower than mining farms when it comes to mining and if you decide to mine Bitcoin with a GPU, it might take you years to mine a single Bitcoin.
With mining becoming increasingly difficult, coders are using graphic cards in order to obtain more hashing power, i.e. the rate at which you mine. They wrote mining software (algorithms) optimized for the processing power of GPUs to mine faster than central processing units (CPUs). Needless to say, such graphic cards are faster, but they use more electricity and generate more heat. That’s why miners opted to switch to application-specific integrated circuits (ASICs). This technology uses less power when mining. ASIC became extremely expensive at one point and you should think twice before you decide to mine for a cryptocurrency, instead of simply buying it.
Mining software is in charge of the actual mining process. If you mine with a pool, the software connects you to the mining pool, while solo miners have their software connected to the block-chain to become a mining node or a miner. We recommend the former since software delivers the mining hardware’s work to the rest of the network and receives completed work from the other miners on the network. Logically, you should look for the best possible software at the moment you’re ready to start. Do your homework and read reviews of their features, reputations, and ease of use. Don’t rely on just one source, but crosscheck the information you obtain.
A mining pool is a place where regular miners who don’t have access to gigantic mining farms come together and share their resources. Like in real life, finding a solution is usually easier when you join forces with others. What is great about this is the fact that you’re rewarded in proportion to the amount of work you provide.
You know exactly how much you’ll be rewarded and the system is very transparent. Without a mining pool, you only get a payout if you find a block on your own. Do some online search to find the best pool at the time when you start mining because the market changes rapidly and it’s quite hard to give recommendations that would be valid in the future.
First, ensure that the pool is mining the cryptocurrency you’ve selected. Also, establish that the pool you’re interested in is available in your country and that the fee for joining it justifies the pool’s reputation. Check how profit is shared, i.e. how much of the coin you should mine before the pool pays out. Finally, you need to choose a pool that is easy to use in the context of your understanding of technology.
Is it all worth it?
If you’ve followed the steps mentioned above, you should be ready to start mining. However, the story is far from over. You need to stay constantly up to date with the market and the changes in the mining community. This includes having the latest tools for your adventure. The profitability depends on many factors, such as your computing power, electricity costs, pool fees, and the currency’s value at the time of mining. There are only mining calculators that can show you if mining a particular cryptocurrency is profitable and you should definitely use them.
Cryptocurrencies will not disappear, but it is hard to say exactly how popular they’ll be in the future, i.e. whether your investment of time and resources will pay off. However, one thing is certain: if you decide to take the plunge, you have to do it properly to stand any chances of making a profit. That’s why you should follow these steps and think well before you make an investment. Good luck!