Cryptocurrency mining is a topic of interest for many people. Today, there are numerous opportunities available for those who want to earn money, and one of them is cryptocurrency mining, which can provide a significant income.
First, let’s understand what cryptocurrency mining means. It all started with Satoshi Nakamoto, who in 2007 began developing the principles of cryptocurrency mining (Bitcoin). In 2009, the first mining application was released. The generation of the first block, “Genesis 0,” brought the first 50 bitcoins to its creators. In the same year, the first purchase of BTC for dollars took place: $5.02 was sold for 5050 bitcoins (which is an astronomical sum today).
The essence of the cryptocurrency mining process is the creation of new blocks in the cryptocurrency network. For this, the mining equipment solves complex mathematical problems. For each new block, cryptocurrency coins are issued. Miners can then store them in their wallets or sell them on exchanges.
To understand the principles of mining, it is necessary to clearly understand how bitcoin is mined.
Information about each transaction within the BTC network is recorded in a special block, which confirms the authenticity of the transfer.
Blocks form a single chain — the blockchain. Each block contains the hash of the header of the previous block, the hash of the transaction, and a random number.
The miner’s equipment performs mathematical calculations to determine the block hash.
After calculating the hash, the miner receives a reward and adds a new block to the general register of transactions.
The mining process is protected using the Proof-of-Work and Proof-of-Stake algorithms. These are sets of rules according to which transactions are conducted, mining is carried out, and other actions are performed within the network.
Proof-of-work (“proof of work”). The algorithm organizes the operation of the entire cryptocurrency network, verifies the authenticity of transactions, and so on. After a certain amount of cryptocurrency is mined in the network, PoW increases the complexity of the calculations. As a result, miners are forced to constantly increase the power of their farms and devices. PoW is the algorithm of a large number of cryptocurrency networks: from bitcoin to LiteCoin and DogeCoin.
Proof-of-Stake (“proof of ownership”). An analog of PoW, the essence of which is that the greatest chance of mining cryptocurrency is received by the one who owns the most coins, and not the most powerful equipment. The algorithm reduces the decentralization of the network but significantly reduces energy consumption. PoS is currently used by Ethereum.
To understand how to mine cryptocurrency, you need to know about the most popular mining algorithms at the moment. These technologies form the basis of cryptographic calculations and affect the mining speed, the necessary equipment and its power, the level of energy consumption, and so on.
SHA-256. The basis of mining on this algorithm is the creation of a 256-bit signature. It is demanding on the hash rate (for mining, a minimum of 1 Gh/s is required). Calculations last from 7 minutes. It is used in the mining of Bitcoin, Bytecoin, Terracoin, 21Coin. Ethash. The hashing algorithm was first used to mine ether. In the mining process, the emphasis is on the volume of video card memory. Ethash is used in the networks Ethereum Classic, KodakCoin, Ubig.
Scrypt. It works on the PoW (Proof-of-work) principle. Compared to SHA-256, it has a higher calculation speed and lower requirements for the power of computing equipment. The algorithm is used in the mining of Dogecoiun, Gulden, Litecoin.
Equihash. An algorithm with which you can mine cryptocurrency on home computers. It is used in the mining of Bitcoin Gold, Zcash, Komodo. CryptoNight. The algorithm is designed for mining cryptocurrency on home computers. It allows you to mine even on a not very powerful video card. The only condition is that it must be discrete. It is used in the mining of Bytecoin and Monero.
X11. The algorithm was developed by the creators of the Dash token. It has excellent data protection and low energy consumption.
What does cryptocurrency mining mean in terms of organizing the process? There are several types of mining that depend on the equipment used and the number of team members.
In mining, you can use different equipment: you need to choose a suitable cryptocurrency and install software. Each type of equipment will differ in calculation speed, resource consumption, durability, etc.
CPU (Central processing unit) CPU mining is the use of a PC processor for cryptocurrency mining. It is characterized by very low calculation speed and, accordingly, low profitability. However, it is still relevant among solo miners due to low energy consumption requirements. To increase mining efficiency, you need to choose processors with a high frequency, a large number of cores and threads. It is not recommended to mine on laptops. With CPU mining, you can mine Dogecoin, Monero, Electroneum.
GPU (Graphics processing unit) GPU mining is the mining of cryptocurrency, in which the power of a discrete video card is used for calculations. It is possible to create mining farms from dozens and even hundreds of graphics accelerators. Mining on a video card is much more profitable than on a CPU. For efficient cryptocurrency mining, you need powerful video cards: for example, starting from NVIDIA 20xx. During mining, it is necessary to provide good video card cooling, as it will work under full load.
FPGA-module (Field-Programmable Gate Array) The use of an FPGA module is one of the promising ways to mine cryptocurrency. Their advantage/difference lies in the possibility of reprogramming the module for the desired mining algorithm. Thus, you can switch between different cryptocurrencies. Another beneficial difference is that FPGA modules provide a better hash rate-energy consumption ratio. The main disadvantage of FPGA mining is the cost of the modules and the complexity of their setup.
ASIC (Application-Specific Integrated Circuit) ASIC mining is a type of mining on specially developed for a certain algorithm computing equipment. Mining takes place automatically; the miner needs to ensure stable power supply, cooling, and equipment maintenance. However, today there is an opportunity to buy and place an ASIC farm or rent it in a hosting company. Thus, you will get powerful equipment with a high hash rate and not worry about technical issues.
Hard Drive You can also use the HDD of your PC for mining. The work is carried out according to the Proof-of-Capacity (“proof of resources”) algorithm. Mining on a hard disk takes place in two stages: plotting and mining. First, the generation of random solutions takes place, which are saved on the HDD. Then the number of the scoop is calculated, and the deadline is determined. Then the minimum deadline is selected, and the miner who beats the rest receives a reward. The calculations do not require high power but only a lot of free space on the hard drive.
In the Browser Cryptocurrency mining takes place while surfing the internet. To do this, you need to install a special browser with a built-in miner. It will use your PC’s resources for mining all the time it is running. Some of the popular browsers for mining are CryptoTab Browser and Brave. Such mining will not be very efficient, but it will help beginners get involved in the industry, as it does not require deep knowledge from them.
By Number of Participants
You can mine cryptocurrency both alone and in a company with other miners. All this has both its advantages and disadvantages.
Solo Mining The oldest form of mining. The miner independently selects equipment, sets up software, chooses a cryptocurrency, and starts mining. All costs are borne by him. But the reward for the mined block is received in full by the solo miner. During the birth of the cryptocurrency industry, this was the most profitable form of mining, as the calculations were fast and did not require large capacities. Today, solo mining is worth doing when mining promising altcoins.
Mining Pools A mining pool is a combination of miners who start working on creating blocks together. As a result, this significantly increases the overall chances of getting cryptocurrency. There are two main types of pools with different payment mechanisms. Pay-Per-Share (PPS), in which the miner receives a reward for each hash created within the pool — even if the block was not created. Pay-Per-Last-N-Shares (PPLNS), with accrual of the reward only when the block is created.
Cloud Mining This is a type of passive mining. In this case, the user pays for the rental of capacities on the territory of the data center of the company. The equipment starts mining, and with the help of a mobile application or a personal account on the site, the client monitors the results. Profit depends on the rented capacities, the cost of cryptocurrency, and the options in the company’s service.
To make a profit from cryptocurrency mining, you need to make a preliminary calculation of costs. If you want to create your own farm, you need to calculate:
Costs for purchasing and maintaining equipment.
Payment for electricity. Rent of premises for the farm.
The computing power of the equipment, which determines the amount of cryptocurrency mined per month.
Assess changes in the value of the chosen cryptocurrency: an accurate forecast will allow you to imagine the expected income.
Mining profitability A profitable option for earning money can be the purchase/rental of ASICs or cloud mining. Their profitability depends only on the starting budget. If you calculate the minimum entry threshold by product, then you can get the following approximate figures:
Purchase of Antminer S21 188TH ($5000): expected income $550* per month. Rent of Antminer S21 188TH for 12 months ($3200): expected income $320* per month. Cloud mining contract ($150): expected income $225* for 60 months. These calculations provide you with forecast information based on the BTC forecast, which will reach $120 thousand. and FPPS 0.0000008. This is not a guarantee of future results, and accordingly, it is not advisable to rely too much on such information due to its inherent uncertainty.
The cryptocurrency industry has certain risks:
Problems with legislation. Very often, mining is not regulated by the legislation of countries, and in some, it can be completely prohibited, for example, in Taiwan, Kyrgyzstan, Vietnam, Romania, and Ecuador. Before starting to work with cryptocurrency, you definitely need to consult with a lawyer. A good solution to the problem can be the services of a hosting company, which will take any risks upon itself.
The issue of profitability. For successful bitcoin mining on your own, you need to buy powerful computing equipment. It not only costs quite a lot but also requires a huge amount of electricity and careful maintenance. Therefore, it will not be possible to place it at home. At the same time, mining on a home PC or a small farm will be unprofitable due to high competition with large farms and pools.
The difficulty of accurately forecasting income. It is difficult to calculate future income from the sale of mined cryptocurrency: the complexity of mining, the popularity of coins, and their value can and will regularly change.
The industry continues to actively develop around the world. Users know that they can get a good income from cryptocurrency mining, even if they mine altcoins: Ethereum, Tether, BNB, Solana, etc. BTC is the undisputed leader of the industry, the course of which affects users’ trust in it.
After the fourth bitcoin halving in April 2024, the profitability of mining changed. To maintain the previous level of mining, it is necessary to increase existing computing powers. Therefore, miners continue to unite in pools or use the services of hosting companies. In the near future, this trend will not only be preserved but will also receive its development.
Despite periodic declines, bitcoin continues the trend of growth, which makes investing in cryptocurrency mining a profitable investment. With the development of mining pools and the appearance of large farms, it is difficult for a solo miner to get a significant income. Therefore, the best option may be cloud mining or the purchase/rental of an ASIC farm from a hosting company, which will take over the installation and maintenance of the equipment. With ECOS.am, you can focus on mining and investing in BTC. We take on all the other work.
Bitcoin mining with ECOS platform. ✔ Access to your crypto assets anytime, anywhere. ✔ Software for managing and storing digital assets - safe BTC mining with ECOS
