What's Cryptocurrencies Mining?
Mining as a challenge and as the completion of a procedure
The term mining appears simultaneously with cryptomonete and can be translated with the word extract, underlining how it is a process, of digital nature, through which cryptocurrency can be obtained. Mining is not the creation of money through digital coins, but a complicated verification procedure that is generated by exploiting the computing power of a computer or particular instruments aimed at this purpose.
The extraction of cryptomonete must be considered as an integral part of digital coin technology, since without this procedure you would not have the completion of the processes that are the basis of cryptomonete.
Its history is connected to the basic characteristic of virtual coins: decentralization. In the moment in which the distribution of this new form of currency was hypothesized, the problem of creating a system of generation of the currency itself that was at the same time safe and not concentrated in a single server was born. The solution was to give Bitcoin and cryptomonete to those subjects, which are called miners, who contribute to the functioning of the system through mining.
How exactly does mining work and how to do it?
But how does creating cryptocurrency work? It is important to consider that since we are talking about digital coins at the basis of the functioning of this system there is a specific technology called blockchain. When you make a transaction using cryptocurrency, the network stores this activity within a series of blocks that are created by a chain of computers. To verify the procedure, you will need to close this chain.
The key required to complete the operation is composed of a random numerical value called “Nonce” and an alphanumeric code called hash which closes a block by sealing it. This system allows to complete the chain making each transaction unique and secure at the same time. In fact, to modify the single operation you should enter each block and alter the individual computers that are part of it at the same time.
The process of cryptomonete extraction is therefore based on a real search since the miner, using a computer and a very high computing power, will try to find a resolution algorithm, intended as a process that involves the creation of any solutions that will lead to the correct hash string. The difficulty is that not only in the creation of the hash are added a series of numbers but to this is added the value of the hash of the previous chain of blocks.
Technically the computer receives a numerical information from another system or from the network and through millions of calculations, made in a second, it elaborates the probable solution that leads back to the hash that verify the operation.
The remuneration of the miner and the role of computing power
As soon as this is found, the server will confirm the approval. In this case not only will the blockage be permanently closed, but the miner will then be granted a certain number of cryptomonete as a contribution to the functioning of the system. Mining ultimately results in a series of calculations that are based on statistical principles, since each hashing may be the right attempt to close the block.
In the early stages, cryptomonete mining was a simpler operation since the system itself needed computing power in order to keep the network transactions running.
Today, cryptomones have become a well-defined reality and more and more people are approaching mining, making this process more complex with increased difficulties in finding the correct hash and a direct decrease in earnings. Understanding the individual stages of mining and how it can be done is important in order to be able to assess whether mining is a worthwhile investment.
The mining steps: setting a goal and the cryptocurrency
If you intend to operate with cryptocurrency through mining, the first aspect to consider is why you decide to acquire the role of miner and devote yourself to the extraction process. Cryptocurrency mining can be a source of income, but it requires time and economic resources to be dedicated to technological equipment and energy consumption.
Prepare the necessary equipment
Once you choose to take the mining route, you will need to set up the necessary equipment and tools in order to operate as a miner. Below is a list of the main elements that form the basis of the mining process:
Computers and hardware
The hardware of a computer is a fundamental element for mining since it carries out the calculation activity 24 hours a day seven days a week, processing the possible attempts to find the correct hash and close the block. In the first years of exit of the Bitcoins and other virtual coins, it was enough to use also the home computer, but today, depending on the type of coin, it will be necessary to prepare tools that are preforming and have a high computing power. It is important to consider that this tool will use all its processing power for mining calculations, for this reason it is advisable to prepare a device that is strictly dedicated to this purpose.
Energy source and internet line
Two other essential factors for the mining process are the availability of an electrical network to run the computer and an internet line. The calculation processing required for mining involves the addition of hardware such as graphics cards and microchips that consume a lot of energy in a continuous and constant manner. For this reason, in order to have a profitable investment it will be important to evaluate the type of contract with the electrical network. In addition, it is mandatory to have a connection to the web through an internet line that is broadband and that works in a regular way.
Cryptographic hash software
To carry out the mining it will be necessary to install specific software on the computer that is dedicated to the search for the right hash alphanumeric string. The choice is not easy, since for each cryptomoneta it will be necessary to adopt the Cryptographic hash software that corresponds to the type of algorithm you are looking for.
Exchange and digital wallet
It will be important to open a bitcoin wallet (or other cryptocurrency wallet) to contain the cryptomonete and use it for possible transactions. One of the main characteristics of cryptomones is that they cannot be physically obtained, since they only exist within the block system.
A wallet has the function of recording the reference code to which the possession of a Bitcoin or other form of cryptomonete is connected. Inside it will then highlight an address that corresponds to the closure of the block. Finally, if you want to transform the cryptomoneta in FIAT currency, it will be necessary to subscribe to an Exchange platform to be used even if you want to transform the crypto currency obtained through mining into another digital currency.
How to do crypto currency mining: the viable strategies
The role of the miner within the cryptomonete system plays a decisive role, which is why over the years more and more people have decided to invest in this form of operation with cryptocurrency. There are mainly three strategies to be employed:
Mining in the first person
It will be possible to tackle the process of extracting the cryptomonete and then verify the individual blocks directly in first person by creating a computer that has suitable hardware and software. To do this it will be necessary to design machines that are highly preforming with a certain amount of energy consumption.
It is important not to underestimate the initial investment. If you want to make money through mining, you will need to work with the most advanced technological tools such as the new integrated circuits such as ASICS, an acronym that identifies the Application Specific Integrated Circuit, i.e. microchips that have been designed to enhance the computing speed of each computer and run a hashing algorithm as quickly as possible.
Depending on the number of ASICS present in the system, you will have the ability to calculate the hash of a block and thus generate profit. To this of course you have to subtract the energy cost, the cost of the internet line, maintenance and the initial investment of the purchase of the devices.
The mining pool
With more miners on the network, the difficulties created by the mining system have increased, leading to an exponential and continuous growth of hardware that would allow for ever greater computing capabilities.
With this in mind, mining pools have developed, i.e. groups of people who decide to share the computing power of individual computers in order to work together to generate greater mining capacity.
To enter in these groups can be very convenient, since they join the relative forces in order to be able to collaborate to the solution of the algorithm required to the closing of the block. The gain is divided according to the hashrate generated by your hardware and the time spent in the pool.
Networked mining through the cloud
The development of digital technologies and cloud systems has also influenced mining, allowing the use of network sharing in order to have more computing power as we will see in the specific paragraph.
Bitcoin Mining, graphics cards and power consumption
The first form of cryptocurrency mining was the Bitcoin mining that started in 2009 and involved the use of home computer CPUs. The computing power was raised, but all it took was a tool that worked continuously. The growth in the number of Bitcoins of their value and transactions, led to an increase in the difficulties in finding the correct hash to close the blockchain, requiring greater computing power.
This has led to a shift from CPUs to graphics processing units called GPUs. The acronym stands for the graphics processing unit, a more flexible system for mining processing, since it is the graphics card chip that performs the calculations necessary for the algorithm. These cards have very high computation processing since they were created to support 3d graphics in games. Miners applied them in order to mine Bitcoin and digital coins where specific microchip creations such as ASICs such as Ethereum were not expected.
The use of GPUs and ASICS have a number of disadvantages. First, with increasing data processing difficulties there is a sharp increase in hardware within computers with a constant investment by the miner in order to be competitive in Bitcoin mining. In addition, the use of these devices leads to a very high energy consumption in Watts/GH numbers, with the production of noise, and also a lot of heat that requires cooling systems that increase consumption. Finally, the maintenance of these devices and their continuous updating must be considered.
Is it worth undermining with Bitcoins today? Can you really make money with mining? State of the art in Italy and worldwide
The value of Bitcoins continues to grow making this cryptocurrency very interesting for investors. The number of miners that have specialized in the process continues to increase but determining whether it can be considered a profitable business and whether it is worth extracting Bitcoins per day today is not something simple as you have to take into account different realities.
First of all it must be evaluated that the computing power for hash extraction has increased with greater difficulties than in the first years, limiting the gains if you do not have suitable and competitive tools.
In the second place it must be considered the birth in Italy and in the world of companies that have specialized in the mining of cryptocurrency, selling their infrastructure in order to offer a contribution to the computing power necessary to close a block, reducing even more the earnings of those who practice the extraction of cryptomonete.
In this perspective, the evolution by a miner to gain from Bitcoin mining, is possible through new technologies and the use of the realities provided by the network such as cloud mining.
In any case, for a beginner who wants to enter the world of Bitcoin and cryptomonete, probably the fastest solution is to buy Bitcoin directly from the various exchanges available online.
For mining, the number of bitcoins per block decreases over time.
In the case of the Bitcoin Blockchain the amount of Bitcoin decreases every 4 years which in terms of blocks corresponds to 210,000 units. Looking at the future actoro to 2140 when the 21 million bitcoins will be created will not be generated other cryptocurrency and from that moment miners will receive only a premium commensurate with confirmed transactions.
There is then a proportion between the amount of bitcoins created and the premium related to the transactions, as well as the bitcoins are decreasing scheduled so in reverse proposition increase the premiums related to transactions. In particular, the amount of bitcoins expected for the creation of each block is halved every 210,000 blocks.
What is cloud mining: alternative way to mine cryptocurrency without using your home computer
Today the solution that can be considered valid and realistic at the same time is therefore cloud mining. The cloud system is a reality that is used in various applications of everyday life and allows us to share data such as documents, videos and photos over the network. Cloud mining combines the concept of cryptocurrency mining with that of network sharing over the cloud. The process is also referred to as cloud hashing and thus allows a miner to purchase access to calculations that are performed remotely in a data center owned by a company that offers the necessary computing power through investment in hardware and shares it with its potential customers.
The main advantages of this system are that it allows the network to be used for cryptocurrency mining without having to prepare the necessary hardware and install the required software. It also reduces energy consumption and the initial investment that will only be related to the cost of the chosen provider and the type of cloud mining service required, the production of noise and heat and of course the adaptation of the systems.
Cloud mining can be a useful tool to continue mining without having to use a home computer.
But it also includes a number of assessments that need to be highlighted. First of all, the profits you make are lower because of the sharing system. In addition, there can be fraud since you cannot control cloud mining software providers. Finally, contracts often contain clauses whereby the mining service on a particular cryptocurrency is interrupted if the value of the virtual currency falls below a certain price, resulting in a loss of profit.