Mining is the activity of maintaining a distributed platform and creating new blocks with the ability to receive rewards in the form of new units and commission fees in various cryptocurrencies.
A distributed platform is a way to solve problems at once on many devices combined in parallel. In the process of mining, a mathematical problem is solved, as a result of which you can get currency for it. In other words, PC performance converts into money, and miner pays just for electricity and the Internet.
Network support consists of confirming transactions by including them into blocks and calculating the key (hash) of such a block. The key of the block does not allow changing the information of the block in the future, which excludes the possibility of counterfeiting transactions made in the block. Finding (calculating) a key with the given parameters does not occur instantly – it is necessary to generate many keys in order to get the given one. But this is not all – after generating the key, you need to receive confirmation of the fidelity of such a block from other network participants. Confirmation consists of checking the block key. In the Bitcoin network, at least 120 confirmations must be received. Such confirmation is another degree of protection against distortion and additional verification of data on the network.
The essence of mining is the creation of a whole network of decentralized computers and the necessary equipment that solves all the necessary conceived using their technical capabilities. All these connections are called nodes in mining. And, the more of them are in the blockchain system, the more decentralized the network is, and all work happens much faster.
Types of mining
From the technical side, mining can be divided into 3 types, depending on the equipment:
- GPU mining, i.e. mining on video cards.
- CPU mining, i.e. mining on the processor.
- Mining on ASICs (ASICs) – special equipment created for the extraction of cryptocurrencies that work on certain algorithms.
Depending on the method, mining is divided into 3 types:
- Individual mining. This is an independent production with using personal equipment, without collective participation in pools. In this case, all the digital coins that you mined, as well as transaction fees, remain with you as a well-deserved profit. For individual mining, the power of the equipment is important, since a large hash rate is needed to ensure the complexity of the calculations. Solo mining is beneficial for mining relatively new cryptocurrencies.
- Common mining, it is mining in pools. A pool is a server that combines the computing power of many miners. It is a common computer network that creates new blocks. The coins mined at the same time are then divided among the miners according to their shared participation in the process. Pooling has become necessary due to the increasing complexity of the network of popular cryptocurrencies.
- Cloud mining. If the previous two methods use your own equipment in mining, then in cloud mining you rent computing power from a service that itself is mining on an industrial scale. In this case, you no longer need to start your own farms and maintain them. It is enough for you to pay for other people’s capacities and mine on the equipment of some industrial crypto-mine, as a result of getting mined coins. Cloud mining makes it possible to join mining without large investments.
- Web mining. One of the least popular methods of cryptocurrency mining. Web mining occurs through sites on which you need to register, install a special program and configure it. The owners of these sites use the power of all users who register on their resource for the extraction of crypto coins. In order to decide whether to work with the help of web mining, you must initially evaluate the size of all possible investments. All this is worth comparing with profit, and also take into account the fact that at the moment the extraction of cryptocurrency has become extremely complicated. Special sites, which are called “cryptocurrency calculators”, do well with such calculations. The power of mining equipment is determined in mega hashes.
The total income of miners amounted to about $15 billion since the launch of Bitcoin in 2009. Of these, $1 billion is a commission.
The terms of Bitcoins emission gave more advantages to those who took up mining with a small aggregate network capacity. So, the amount of work needed to generate the unit, in 2013 amounted to almost half a million times more than after releasing the network. With an increase in the total processing power of miners, generation becomes more energy- and hardware-intensive. This is accompanied by a planned reduction in the size of the mining reward. This way halving came in sight. In the 2000s, fewer people knew about mining than now. Thas why, the benefit of mining was much more. But anyway there were some risks. F.e. on Reddit now you can find a lot of stories where miners got lost their keys and all the capital as well. But if there are all right with keys, the miner from 2010 has huge funds now.
In the 2000s, fewer people knew about mining than now. Thas why, the benefit of mining was much more. But anyway there were some risks. F.e. on Reddit now you can find a lot of stories where miners got lost their keys and all the capital as well. But if there are all right with keys, the miner from 2010 has huge funds now.
Nowadays, it is quite difficult to start solo mining, because of the high competition of mining farms, pools and other entities. In addition, the start is expensive. In order to earn, you should initially invest quite a huge amount of money on expensive equipment and electricity. So you need to weigh the pros and cons before purchasing assets.