Academy Author ◦ 22 Nov 2023 ◦ 8 min read

Crypto Mining Explained

Crypto Mining Explained

Since the first blockchain network was launched, the mining concept was introduced. 

It may seem like not such a necessary knowledge when you just get to know about the cryptocurrency, but it might really benefit you financially, as it’s related to the way cryptocurrencies are acquired.

There are some basic principles to be explained that will shed some light on how does crypto mining work. 

What Is Crypto Mining?

The easiest explanation of mining is that it is the way to create new tokens on the blockchain network. Though it’s a very right and literal explanation, it’s not enough to really understand the process. Let’s dig deeper and see how the creation of the new tokens happens. 

Blockchain is a decentralized system without any central authority that controls the operations, so it needs the algorithm to secure itself from any kind of fraud or malicious activity. 

The computer needs to solve a complicated puzzle to validate the transactions on the network and add them to a distributed ledger. Mining is closely connected to validation or securing the transactions on the network, and it protects the blockchain from double-spending the tokens. The computers that participate in validating the transactions and adding new blocks use a lot of computational power and are rewarded for their efforts in the native currency of the network. Those rewards motivate them to continue securing the blockchain. 


The algorithm for securing the network is called the consensus mechanism. As explained above, it’s the way blockchain protects itself from attacks. 

Proof-of-Work was the first-ever introduced consensus mechanism. The participants of the validation process here are called miners and they run the computers that compete in solving complicated mathematical equations in the form of cryptographic hashes. Hash is a kind of digital signature of a chunk of data. It is represented as a 64-digit hexadecimal number. Each block of the blockchain has a hash as it is an essential part of blockchain security. The output of the hash function of each block refers to the previous one and that’s how the unbroken chain of the network forms, leading back to the very first block. 

Basically what they do is perform millions of computations to get the required output from the given input. When a transaction happens on the blockchain, the hash value is generated. All the computers involved in mining start trying to crack the code. The first one that actually does it gets a chance to add a new block on the blockchain and get its reward. The peers can easily verify if the added blocks are correct by tracking their hash. 

Crypto Mining Profitability 

With the growth of the blockchain, the equations become more and more complex and computers need more power to solve them. For example, about 10 years ago, anyone with a decent home PC could participate in Bitcoin mining and earn from it. In 2022 it is barely possible as mining became a huge competition. Just imagine: in 10 years from 2009 to 2019 the amount of computational power needed to mine one block increased 12 trillion times. 

At the same time, most crypto coins have a limited supply, so their price of them grows when the demand increases. The value also increases when the coin becomes rarer. 

Now all mining, especially for such big blockchains as Bitcoin, is performed by the special companies running huge mining farms consisting of many computers. People band their resources and devices together to get a chance to win new blocks. It gets tricky with Bitcoin, mainly due to the cost of mining. To make any profit one needs to run really strong hardware and use a lot of electricity, so the received amount will beat the expenses. 

That’s why today's mining process requires spending a huge amount of computational power, and that is the main concern about Proof-of-Work blockchains like Bitcoin. It is one of the reasons people have created a new consensus mechanism called Proof-of-Stake, which is considered to be more energy-efficient and doesn’t require computers to solve the puzzles anymore. According to the information from The Society of Computers and Law, Proof-of-Stake uses 99% less energy than Proof-of-Work. 

Another solution is the application of new sources of energy.  

How to Start Mining Crypto?

To join the process of mining cryptocurrencies today, you will need a very strong graphics processing unit (GPU), and even better a few of them, or an application-specific integrated circuit (ASIC). The mining rig should also be all the time connected to a stable Internet. 

Mining is also impossible without specific software. There are both free options (like CGMiner) and fee-based (like Awesome Miner) solutions. The next thing is a crypto wallet that each miner needs to store earned coins. 

Before starting to mine, it’s recommended to revise the electricity tariff you use. As this process needs a lot of power, you don’t wanna end up paying much more than make. 

And the last thing, even though it’s not a strict requirement — is to join a mining pool. It is a group of people that combine their resources and efforts to multiply their mining power. All the rewards when received are distributed equally between the participants. Most probably it will give you a higher chance to earn from mining.  

Additionally, make sure that in the country where you’re planning to mine, it’s not prohibited, like, for example, in China. Even in Europe, lawmakers are working on lawsuits to regulate such activity. 

Different Ways of Mining 

The first and the most used at the very beginning is CPU mining using a PC or a laptop. However, nowadays it’s considered ineffective, as it takes months to acquire even a small particle of a coin. Keeping in mind that it still requires electricity and internet expenses, it doesn’t seem an attractive solution anymore.

The next way is GPU mining. Multiple GPUs are connected to a mining rig. Additionally, it needs a motherboard and a cooling system. Plus all the systems should be connected to the Internet all the time. Also, each miner can be a part of an online crypto mining pool. But the stakes are high, as a proper GPU that can be effectively used for mining will cost somewhere around $3000. 

The most effective way of mining today is by using an ASIC chip. While they are quite expensive, they offer the highest mining efficiency. Because of the price, they are rarely affordable for beginners, which creates the risk of the mining industry being dominated by a few biggest players, altering the network.  

Mining can also vary in methods. For example, one can do it solo, by joining the mining pool or going for cloud mining. Solo mining only makes sense if you have a big amount of money to invest due to the existing competition. Entering the Pool mining in this case is both easier and more profitable as you don’t always need to purchase all the hardware and software yourself. 

In cloud mining, the user rents the mining power from an industrial mining service. It is a good way to start without a big prior investment. Additionally, cloud mining expands the adoption of crypto, by making it available for more people. 

Blockchains Allowing Mining  

The concept of mining is best known for Bitcoin, but it’s also used on several other blockchains. Moreover, nowadays there are more profitable tokens to be mined. 


Even though the second-largest blockchain network is planning to move to the Proof-of-Stake consensus algorithm very soon, it is still available for mining. It can be done at home with the power of GPUs. It is a relatively simple process. After downloading the wallet, you will need to adjust some node settings. 


The native token of this peer-to-peer blockchain is created for the efficient creation and transfer of new crypto assets. In 2022 it’s one of the most profitable coins to mine. It uses a new KAWPOW algorithm and was designed to mine on readily available consumer-grade hardware. 

To start mining the user needs to create a wallet, create an address, and join a mining pool. 


Monero blockchain is based on the Crypto Note protocol that holds the utmost significance of equity in mining crypto. It is also easy to set up the mining rig for Monero, you just need to get the hardware and make a wallet. Another advantage is that the block time on the Monero network is just 2 minutes. 


A cryptocurrency that was designed with ASIC resistance, so it’s complicated for big players to conquer the market. The advantage of the ZEC coin is also long-term sustainability as its performance is less volatile than other cryptocurrencies. The best way to mine it is by using GPU. The block mining reward is 10 ZEC. 

Bitcoin Gold 

The advantage of mining Bitcoin Gold is the ban on ASIC, so it leaves the chance to earn not only for industrial mining. Moreover, to start earning you don’t need a very big investment, compared to Bitcoin or even many other altcoins

The developers aim to reduce the risk for miners, so it allows miners to direct the hast to any coin and save money even when the price of Bitcoin Gold drops. The block mining reward here is 12.5 BTG.

Dogecoin (DOGE)

Cryptocurrency initially developed as a meme coin for fun has been later popularized by Elon Musk and got many followers. With time it has developed into a proper token suitable for transactions and storing the value. The altcoin boom of 2021 has made many DOGE holders much richer than they were before. The DOGE supply is infinite and new tokens are added every year. 

To mine DOGE you can use your CPU, though it won’t offer fast mining. The best way for DOGE is GPU mining. It will also require software. Individual mining is possible, but it is recommended to join a mining pool for higher profits. The block mining reward here is 10000 DOGE. 


Originally forked from Monero, AEON is based on the CryptoNote protocol and uses the Crypto-Night-Light protocol and ring signatures to make the transactions untraceable. It can be mined with a CPU or GPU. The average block time for AEON is around 3 min and the block reward is 1.3 AEON.