With cryptocurrency firmly remaining in the crosshairs of media and people’s attention, mining remains a popular way to earn crypto. However, even in our day and age not that many people know about the technical details of mining: how it works, what equipment to use, what is centralized mining, and how to make it profitable. We’ve decided to change that with our post about the basics of mining cryptocurrencies, so let’s dive in.
How Cryptocurrencies Mining Works?
Cryptocurrencies mining is a process where your mining rig has to perform precise calculations to find that one particular block that will bring you a reward. This reward consists of a number of cryptocurrency coins, with how much depending on the crypto in question.
Now, let’s elaborate a little bit on that. If you are a solo miner, your mining rig will be your computer. Sooner or later, you will have to upgrade it, if you wish to enter serious trading, but we’ll talk about different types of equipment later on. Now, to earn that sweet crypto coin, your computer will have to find a needed line of hash. To find it, it has to solve math equations, which is a consent protocol called ‘Proof of Work’. It determines who gets the reward for completed tasks.
Sounds simple so far, right? Well, difficulties start when you take other people into account. The more people are mining, the harder the equations become, and the harder it is to receive the reward. And, since a lot of people are mining right now, it became a hard task indeed.
Is Mining Cryptocurrencies Profitable?
Now, as you’ve read the previous segment, you may ask yourself a question: if mining became so difficult, is it even profitable for me? Well, it depends. If you are planning to buy yourself a good GPU and start mining Bitcoin solo, then no, it isn’t. However, there are many ways to increase the profitability and efficiency of your mining.
The most common and cheap way to do so would be to join a mining pool. As you can guess, the mining pool is a platform where you and other miners pool their resources (hence the name) to achieve better results. The reward is split among the participants according to their performance, with each paying a small fee to the pool. All in all, not a bad way to start earning yourself some crypto.
Another way of ramping up profitability would be to join a mining group. It would also allow you to get a cut of the group’s earnings, similar to the mining pool. However, in general, it will be harder to get a reward since there are fewer people mining than in pools. Many groups also require you to have high-end equipment to join, which means a longer time to turn a profit.
The third way would be to create a professional rig by yourself or to create your mining group. It carries the heaviest costs and risks out of three, as not only you would need to spend more money on the equipment and energy bills, but chances of you hitting the reward block are also lower, at least at first. However, this method will also bring the most rewards, as you will get more out of the prize block.
Still, with the right strategy, smart planning, careful money management, and a little bit of daring, you can ensure that your mining venture would be profitable no matter what way you choose.
How to Start Mining Bitcoin & Crypto
With that being said, let’s take a look at different types of mining. Since your computer does mining, those types correspond with the part that will complete the needed tasks. Currently, there are four types of mining.
#1. Mining With CPU
Back in the days of crypto genesis, CPU was the primary component of mining. It was the most effective way since most processors could easily use their multi-threads to speed up solving the equations. Nowadays, however, CPU mining is almost non-existent beyond the few cryptos that still support it. GPUs, ASICs, and Cloud mining have all but surpassed the productivity of CPUs.
#2. Mining With GPU
This is the next step in mining. One day someone figured out that GPU may work better with mining and performing multiple calculations at once. They’ve modified the needed code to make it compatible, and it worked well. This discovery resulted in a rush to buy the most powerful GPUs on the market, emptying stocks and raising the price.
It soon ended but it brought a lot of attention to the mining as a whole, even from previously uninterested parties. Today GPU mining is a default option that minimizes risks while still allowing miners to profit.
#3. Cloud Mining
Cloud mining is something of an oddity among the mining community, to the point that some wouldn’t even acknowledge it as a “true mining option”. Basically, it is a company that runs all the needed mining hardware and rents its productivity to you for a price. Meaning that you pay a company to mine for you, which decreases the profitability of your venture.
There is also the ever-present threat of being scammed, as a lot of cloud mining services more often than not take the money and disappear on users. Still, if you find a reliable service with satisfactory prices, you will be able to set up a profitable mining venture, as there would be no additional bills on electricity and no need to buy expensive equipment.
#4. ASIC Mining
The final type of mining is ASIC mining. ASIC means an “application-specific integrated circuit” and is a piece of hardware specially designed to maximize mining efficiency. Its productivity compares to that of a hundred GPUs at a fraction of price. It would cost you otherwise and with smaller energy consumption.
However, it comes with a price: while you can use GPUs to mine almost any crypto out there, ASICs are typically designed to mine a single coin, so Bitcoin ASIC will only mine Bitcoins, Litecoin ASIC only Litecoins, and so on. What’s more, some cryptos recently started to push back against ASIC mining, making it less profitable to use, if not downright impossible. So it is a high risk, high reward type of mining.
What is the Best Way to Mine Crypto?
That is the question that we couldn’t answer for you. It depends on many factors like what coin you want to mine, what type of hardware you plan to use, and whether or not you are averse to taking risks. While GPU mining is a stable but slow source of crypto income, ASIC favors a fast and aggressive approach to mining. At the same time, cloud mining would allow you to gain crypto without delving into the technical details of which rig is better and why.
The same could be said for different mining models. Mining pools would allow you to quickly start mining crypto coins quicker, but for a lower cut of a prize. Joining an existing mining crew, in turn, would require you to buy better equipment off the bat. And solo mining would allow you to receive a full prize in exchange for higher expenses. As you can see, every path has its ups and downs.
For a novice, it would be better to fully assess risks, look up mining, and only then decide. You can always find more information available on the Internet, including our blog.
What Crypto Is the Most Profitable to Mine?
As it happens, recently we’ve published an article about the most profitable cryptos to mine. The thing about mining is that while Bitcoin is still the most popular and has the highest price, it is not the most profitable coin to mine anymore. The difficulty to enter is too high for any solo miners, as you will need a whole mining farm to have a chance to get a prize block. However, there are lots of altcoins that can bring you profit if you mine them smartly. You can read our top 10 list of the most profitable coins to mine here.
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With that, we can conclude our Mining 101 article, with you knowing what types of mining are out there, how you can increase the profitability of your mining efforts. Once you choose what technology is the best for you and what coin you wish to mine, you can set out to finally get to mining those crypto coins.
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