Since the very emergence of cryptocurrencies, people are wondering what are the best strategies they could employ to make profits.
Investing, trading, or mining – are all powerful ways to receive rewards. Each method has its peculiarities, so you need to choose something that best suits your needs and competencies. While investing in and trading cryptocurrency have become all the rage in the past few years, mining is a process less known by audiences and implicitly less used.
Let us explore everything about mining so that you can make a pertinent decision regarding your next move in the crypto space. Read on for meaningful insights!
Crypto Mining – What Is It?
First and foremost, you have to learn what mining means and implies. Mining is the process of verifying transactions by solving complex cryptographic problems. These transactions strengthen the security of the crypto network, rewarding individuals through payment in cryptocurrency. Mining is performed using high-tech computing systems able to solve those almost impossible-to-guess mathematical puzzles.
Sophisticated hardware is a must in mining Bitcoin or altcoins, as without such technological advancements, the process would be even more painstaking and time-consuming. Before these technological developments came into existence, mining Bitcoin was performed on desktop computers with standard CPUs (central processing units). However, the process was slow as molasses in January. Today, Bitcoin is produced using large mining pools spread across several geographies.
What is the Puzzle all About?
You cannot mine cryptocurrency if you do not understand the heart of mining – a mathematical puzzle. This problem is, in fact, a 64-digit hexadecimal number that, once guessed, will generate cryptocurrency that you can then store in a virtual wallet. An example of such a puzzle is “0000000000000000057fcc708cf0130d95e27c5819203e9f967ac56e4df598ee”. You understand nothing, right? Keep your calm – it is not as complicated as it seems. It is rather guesswork than a complex mathematical problem, and if you have the right equipment and a bit of technology inclination, your chance of solving it is greater than expected.
Why does the above-mentioned number contain letters, too? Because it is hexadecimal, so each digit has 100 possibilities, zero through 99. “Hexadecimal” can also imply 16 ways for every digit if we are to consider the Greek word for six – “deca.” Nonetheless, a cryptographic problem provides only 10 options for representing numbers, which is why letters like A, B, C, D, E and F are added.
The 64-digit hexadecimal number is also called a hash, as the miners in Bitcoin’s network have to find a number equal to or less than a target hash in SHA256, Bitcoin’s Proof-of-Work algorithm. Corresponding hardware would generate hashes at various rates – terahashes per second (TH/s), gigahashes per second (GH/s), megahashes per second (MH/s) – to come to a possible solution.
What Does It Take to Mine Crypto?
There are a few essentials without which mining cryptocurrency would not be possible, including:
Mining hardware is a must, especially if you plan to mine proficiently and competitively. Powerful and sophisticated computer equipment may be a mining drawback, as it tends to be pricey. This is also one of the reasons many people run away from this crypto-earning method. But if you have the money to invest in top-notch equipment and a flair for the latest technology, this should not create a problem.
Thus, consider an application-specific integrated circuit (ASIC) or a graphics processing unit (GPU) when looking for mining computing systems. Today’s most mining computer systems are based on ASIC technology, as it focuses on one thing and one thing only – mine for crypto. This is great for Bitcoin miners, but in the case of Ethereum miners, things are not the same. They prefer purchasing individual graphics cards as a less costly manner to perform mining operations. Ethereum mining is still profitable, but note that Ethereum will soon become Ethereum 2.0, which will change its Proof-of-Work consensus into Proof-of-Stake.
Consequently, ETH will no longer be possible to mine. Investing in or trading Ethereum are still viable options, so if mining is not your thing, you may want to try another earning method. Whatever your choice, do not forget to inform thoroughly about the Ethereum platform and its native currency, and check the ETH price and volatility.
Such technology varies in price, so expect to pay a couple of hundred dollars and tens of thousands of dollars equally. Now, it is only up to you whether mining using state-of-the-art equipment or not, as this choice also involves your mining competencies. If you have the experience of guessing the 64-digit hexadecimal number, then go for it.
Mining software comes in a variety of options, depending on what cryptocurrencies you mine, the operating system, and more. For famous digital currencies like Bitcoin, you have several types of software at your disposal; however, pay attention to the slight differences between them, and choose something based on your needs.
If you are lucky enough to earn some crypto from mining, you will need a virtual wallet to store your digital goods. In fact, you store the keys for the earned coins or tokens that are vital for keeping your assets safe and sound. If you ever lose access to your private keys, you will lose your crypto, too, so ensure you choose your crypto type carefully, according to the number of digital goods you store, their kind, and your very needs.
Since crypto storage is categorized as “hot” and “cold,” find the option that best aligns with your needs. Cold storage, for instance, does not imply an Internet connection, so your private keys would be stored in hardware that comes in the form of a USB, physical bitcoins, or paper wallets. If you mine Bitcoin and make considerable gains from your mining activity, you may consider a cold storage wallet rather than a hot one. Take hot storage into account only for crypto that you plan to spend out or trade and thus are not held in your wallet for the long term.
What Crypto Can be Mined?
Ether (ETH), Bitcoin (BTC), Litecoin (LTC), and Monero (XMR) are examples of cryptocurrencies that can be mined. Now, you decide which is best for you according to your very knowledge or each mining competency.