Cryptocurrency is changing the world we live in at a rapid pace. Chances are if you have access to the internet, then you’ve heard of Bitcoin. These digital currencies are growing at a fast pace, and the number of people who sell and buy them is increasing as well. As more and more people seek to learn about cryptocurrency, it’s important to educate yourself on what it is and how you mine it.
What is Cryptocurrency?
Simply put,cryptocurrency is a form of digital money. It is specifically designed to complete online transfers or purchases. They give users the ability to make payments without the need for a government backing, banks, or any other third-party involvement. Payments made with cryptocurrency are typically safe and secure.
What is Crypto-Mining Exactly?
Alright, so you have an idea about what cryptocurrency is, but how is it mined? Mining is essentially the method by which cryptocurrencies come into existence. People refer to it as mining because it is similar to the way we mine for gold or other valuable metals.
Some amount of cryptocurrency exists in the protocol layer, which is similar to the metals that reside underground. The goal of a miner is to extract the currency and bring it to the surface. Miners do this when they create a block of transactions and place them into a blockchain network. As a result, a new cryptocurrency is awarded to the miner.
That means that mining for cryptocurrency has two essential functions:
New transactions are added to blockchain networks
How Does it Work?
Let’s dive into an overview of how all this works.
Cloud mining offers a method to mine a specific cryptocurrency, like Bitcoin, without the need to have a lot of hardware and related peripherals often associated with mining. Companies that offer cloud mining give users the opportunity to open up an account and join in the mining process for a basic fee.
One of the perks of cloud mining is that it makes mining available to a wider variety of people who can join from anywhere around the world. Joining a mining cloud gives you access to a mining pool and requires you to purchase “hash power.”
If you’re part of the mining cloud, you have a share of any profits realized, and since the mining is done in the cloud, you don’t have to worry about energy or equipment costs.
Building Your Own Crypto Rig
Building your own crypto rig isn’t as simple as some people think, however, there are some steps you can take to make things a little easier on yourself. Perhaps the most straightforward method is to sign up for an account and download the software at nicehash.com.
The Nicehash software removes a lot of the technical complexity and takes care of it for you. It even uses an algorithm that tells the program when to switch if a more profitable method presents itself. You do have to pay a fee in return for the convenience of the software, but if you’re not interested in spending thousands of dollars in hardware, this is an excellent place to start.
Next, you’ll set up a wallet on the same site, which will accrue money as you mine. Once you have earned at least $20, you can transfer the funds to your bank account if you want to.
The demand for mining hardware is high, so you want to make sure you don’t get taken advantage of when you begin looking. Find a company that has a good selection of graphics cards, and reach out to determine which one is the best value to mine cryptocurrency.
Your best bet is to reach out to a big box retailer to ensure that you are not getting ripped off, or at least use them as a starting point to validate prices against online prices. You’ll want to find a powerful GPU that is capable of handling a lot of intense processing.
The amount of RAM and the size of your hard drive do not have as much of a bearing on your ability to mine as you might think — 8Gb of RAM is plenty of power. If you decide you want to have multiple GPUs, then you might consider upgrading your RAM, but if you are content with one, then you shouldn’t have any problems.
Once you have all your hardware up and ready to go, find a community for the coin you’re interested in mining. If you want a good reference site for starting, visit simplemining.net, otherwise, try to find a site that aligns with the coin you want to mine and have at it!
Cost & Profitability
Is mining cryptocurrency profitable? Let’s take a look at one way to make an educated determination.
If you need a good place to determine how much mining is going to cost you versus what your profit payout will be, take a look at this mining calculator. You can enter information like hashing power and power consumption, and the calculator will tell you your profit ratio and your profit per day/week/month/year. You can also choose between currencies via a colored tab lining the top of the calculator.
Types of Coin to Mine
There is no shortage of cryptocurrency to mine in today’s environment. Still, you want to make sure you do your research and determine which coin works best for you and your setup.
Here are the details on the hardware and software needed for mining Bitcoin.
Initially, mining Bitcoin with your CPU was the only way a user could mine. However as network became more secure and Bitcoin became more challenging to earn miners found new and innovative methods for mining. Unfortunately, you could mine with your CPU for years and never make a coin.
Around 18 months into the Bitcoin network, someone discovered that the GPU was much more efficient at mining. As a result, the CPU gave way to the GPU. That meant a substantial increase in mining power while using far less power per unit.
Next in the evolution of Bitcoin mining came FPGA, or Field Programmable Gate Array. That was the first among many pieces of hardware designed specifically for mining Bitcoin. While users didn’t see the same increase experienced moving from CPU to GPU, they did realize a benefit through power efficiency.
Now, serious Bitcoin miners make use of the ASIC as mentioned above (Application Specific Integrated Circuit) chip. These chips are made to do one thing and only one thing: mine Bitcoin. The benefit of an ASIC dramatically outweighs the fact that it just does one job. An ASIC chip increases hashing power by 100x while reducing overall power consumption.
You can mine Bitcoin in two ways: through a Bitcoin mining pool or with a Bitcoin cloud contract. If you decide to join a pool, be sure you have a cryptocurrency wallet so you’ll have a place to keep your Bitcoin. Set your miners to connect to your mining pool and you’re ready to go. Now every block your pool generates is divvied up among all the members of the pool accordingly.
Here are the details on the hardware and software needed for mining Ethereum.
With Ethereum mining, there are two basic types of hardware: CPUs and GPUs. Using a GPU means you’re going to get a higher hashrate, which means you’ll have the ability to complete puzzles at a quicker rate. Setting up multiple GPUs allows for greater performance, but can take a little longer to build. Unfortunately, at this time, ASIC chips are not available for Ethereum.
Once your hardware is ready to go, you’ll want to install mining software. If you are familiar with command line syntax, you can install Geth to begin mining through an Ethereum node. Otherwise, you can download it and follow the instructions for your operating system.
When you have the software installed, your node will be able to speak with other nodes, creating a connection to the Ethereum network. Not only does this allow you mine Ether, but you can also create and send your smart contracts and transactions via the command line.
Here are the details on the hardware and software needed for mining Litecoin.
Similar to Bitcoin, you used to be able to do the majority of your mining with your CPU or GPU, however now it is much more profitable to use ASIC miners. If your goal is to gain exposure to mining, your CPU and GPU will work fine; however, if you want to lower costs and get serious about mining, you’ll want to go with an ASIC chip.
If you decide to go the route of an ASIC miner, these typically come installed with mining software on them. If not, look for a Litecoin mining pool like Antpool or BitMain to get started. Make sure you have your wallet available so that when you receive your piece of the award for completing a block, it gets deposited in the right place.
Here are the details on the hardware and software needed for mining Dash.
Just like with Bitcoin and Litecoin, Dash mining is most profitable if you’re making use of an ASIC chip. There are Dash specific ASIC miners, so keep an eye out as they are very difficult to obtain. Bear in mind that you may also need to buy a Power Supply Unit since your miner doesn’t include one.
Solo mining with Dash isn’t profitable, so you’ll want to join a mining pool to get started. Be sure to look for a reputable pool, so you’re not getting scammed. Find an existing Dash P2Pool to get favorable mining times and fees.
Be sure that you have your wallet setup to receive Dash currency. There are both desktop and mobile wallets available, but if you decide to hold large amounts of coins, you may want to look for a hardware wallet like Trezor or Nano S.
Here’s a quick review of some of the software you’ll need for mining cryptocurrency.
As we discussed in the previous section, you want to make sure you have a secure cryptocurrency wallet to send, receive, and store your digital currency. Depending on which coin you decide to mine, there may already be a recommended wallet available.
Your wallet does not store the cryptocurrency itself, but rather a private key that shows you own a public key which connects you to a specific amount of currency. Additionally, your wallet behaves like a personal ledger which records all your digital transactions.
Typically you want to use the endorsed wallet for the coin you’re mining. For instance, Bitcoin has Bitcoin Core Wallet, Ethereum has MyEtherWallet, and Litecoin has Litecoin Core. You can also use a custodial wallet like Coinbase which lets you keep all your funds on their exchange, which doubles as a wallet.
Here are some of the more common programs you’ll use when mining cryptocurrencies.
Mining Programs Used for Different Operating Systems
There is no shortage of programs available when it comes to mining for cryptocurrency; however, different operating systems offer different options. Some programs are available on multiple operating systems but may have different features.
Here is a rundown of some of the more popular cryptocurrency mining programs available on Windows, Mac, and Linux operating systems.
- MINER GATE
- MINE PEON
- BFG MINER
- CG MINER
- 50 MINER
- CPU MINER
- UFASOFT MINER
50Miner is one of the easiest mining software to set up. It offers self-detection of new blocks and supports both Litecoin and Bitcoin. 50Miner provides an easy-to-use GUI and works so that all you have to do is log in. This program also provides some handy built-in widgets and keeps all settings in a configuration file.
- NICEHASH MINER
- DIABLO MINER
- RPC MINER
- BFG MINER
DiabloMiner is a GPU miner that allows users to perform hashing computations quickly and efficiently. It uses the command line and works with ATI Stream and Nvidia drivers, which will enable users to establish a terminal for program usage. DiabloMiner supports a large number of pools, and can quickly switch in the event of a failed connection.
- CG MINER
- BFG MINER
- EASY MINER
EasyMiner offers an easy to use GUI which wraps around a combination of the BFGMiner and CGMiner software. This software provides support both the stratum mining and Getwork mining protocols. EasyMiner supports both pooled and solo mining efforts.
This mining software provides graphs so you can see the performance of your mining activity, as well as configuring your miner automatically. Additionally, EasyMiner includes GPU and CPU mining support, fan speed control, self-detection of new blocks, and remote interface capabilities.
Cloud Mining Programs
- GENISIS MINING
While MineOn offers Bitcoin mining services to all its clients, their expertise lies in mining hardware. Their wide range of ASIC chip mining products provides a wide range of options for mining Bitcoin. While these pieces are expensive up front, they could potentially pay for themselves quickly based on the exponential increase of the value of Bitcoin.
Many mining strategies are floating around, but you’ll have to decide which one makes the most sense for you and your expectations for mining cryptocurrency.
Mining the Most Profitable Coin
This method of mining makes sense if you’re in it to make money. Why would you do anything else? Use a mining profitability calculator like the one mentioned previously to determine which one offers the best return based on your rig. Just remember that the coins that are the most profitable for you might be coins that offer a low market cap.
Additionally, you can visit whattomine.com to get a good idea of which coin to mine on any given day. This site uses the current valuation of the coin plus the difficulty of mining the coin to provide a good idea of which coin might be the most profitable.
Of course, if everyone knows it’s the most profitable, the value of that coin at the end of the day may not be what it was when you started mining it.
Mining the Coin You Believe Will Be the Best Investment
You can use speculative mining to try and determine which coin you believe will be the best investment in the future. Some think that Bitcoin will always be the most profitable cryptocurrency on the market; however, that may not continue to be the case, and it may not still be the best investment.
Something important to remember no matter how confident you are in the future of a cryptocurrency: never go all in. If you do, you might end up losing everything. Set aside time each month to mine new coins that have just hit the market and have a low hashrate. You never know when a coin might blow up and you’ll already have some sitting in your cryptocurrency wallet.
Mining the Most Profitable Coin and Buying Coins That Offer a Better Investment
This is another type of speculative mining, but instead of spending time mining coins with low hashrate, buy them with your profits from the coins you do mine. It This lets you dedicate 100% of your time to mining the most profitable coins while setting aside coins you believe to be a better investment in the future.
Mining Coins with a Low Hashrate and Hope
We’ve already mentioned mining coins with a low hashrate a few hours a month, but this strategy is different. With this method, you’ll spend the vast majority of your time researching little-known or newly released coins and setting your rig to mining them.
The hope is that as you accumulate these coins, they’ll gather traction in the market and become more profitable. At that point you can sell the coins at their high, then point your rig to another new or unknown coin and start the process over.
Whether you plan on mining cryptocurrency as a way to make money or you just want to educate yourself more on how it’s done, mining can be a rewarding, worthwhile experience. There is no shortage of available currencies to mine available today, but remember to do your research before you set out on your journey.
Watch for scams and other shady behaviors looking to take advantage of your desire to mine cryptocurrency. Remember that it mining might be challenging, but can be worth it over time. No matter what, get your rig ready, download your software and set up your wallet so you can have some fun mining digital currencies!
Justin lives in Kansas City with his wife and four crazy children. Along with writing about cryptocurrency part time for SurveysSay, he also writes about home automation and financial technology. In addition to non-fiction, he also enjoys writing speculative fiction novels, short stories, and flash fiction. He enjoys steak, BBQ, and take inspiration from many authors including Isaac Asimov, Stephen King, and C.S. Lewis.