Cryptocurrency mining or ‘crypto mining’ is the process that allows transactions in a blockchain to be verified. The mining process itself involves the calculation of extremely complicated mathematical problems using cryptographic hash functions. Each time a miner solves a ‘block,’ he gets rewarded with that specific cryptocurrency.
The interest in cryptocurrency mining has increased significantly over the years.
Cryptomining is very profitable, and people have been doing it ever since Bitcoin was created back in 2009. At first, it was relatively easy to mine Bitcoins, and you only needed a regular computer to mine dozens of Bitcoins.
Currently, mining has become far harder, especially when it comes to Bitcoin mining, as the difficulty has gone up significantly. Each cryptocurrency has a different mining difficulty as the more computers are trying to solve the math problem, the mining difficulty is adjusted and increases.
Even though mining by yourself can be difficult, it is still really profitable, and big companies have dedicated their resources to crypto mining recently. One of the most massive Bitcoin mining rigs is in Mongolia. Bitmain has around 25,000 machines that process around $250,000 worth of Bitcoin every single day.
It can be quite tricky to calculate your profit while mining because there are many factors involved. Not only your electricity cost and rig but also smaller factors like exchange rate, other fees, other possible complications, and more. Cryptocurrencies are significant, but it can still be difficult to cash out your cryptos for fiat, there are plenty of services out there. Still, they charge pretty high fees that could lower your profits significantly.
If you have a big enough operation, these smaller factors will not be as necessary; however, for more minor participants, these factors can be crucial and need to be taken into account from the beginning.
To start mining cryptocurrencies, you should know that there are two main types of mining, GPU mining and CPU mining.
GPU stands for the ‘Graphics Processing Unit,’ and it is used in the mining process of cryptocurrencies. GPU mining started out as an alternative to the traditional CPU mining because it was more efficient, although technological advancements are still being made on both methods.
GPUs simply offered a higher level of processing power because they have large numbers of ALU’s (Arithmetic Logic Units). Your current GPU could be better or worse than your current CPU, so it’s always important to check before starting to mine.
As mentioned above, each cryptocurrency has a different mining difficulty, but it’s also crucial to account for the performance of each crypto. For instance, you might be able to mine more Ethereum than Bitcoin, but your ROI could still be lower based on the fact that Bitcoin is outperforming ETH in terms of price action in the market.
Bitcoin is still one of the best cryptocurrencies to mine, but it does require some serious processing power. Although the initial investment might be quite high, Bitcoin is definitely worth it as it is the most solid coin among all cryptocurrencies.
Algorithm: Proof of Work
Hashing Function: SHA-256 hash
ROI since launch: +5,338.12%
Curr. Price: $7,357
Block Mining Reward: 12.5 BTC
Dogecoin started out as a ‘joke’ cryptocurrency but has become one of the most popular and valuable cryptocurrencies out there. Dogecoin is currently ranked 30th by market capitalization, and it is listed on top exchanges like Binance, Huobi, or Bittrex. Dogecoin requires substantially less power than Bitcoin and can bring higher rewards, but it is less stable.
Hashing Function: SHA-256 hash
ROI since launch: +270.56%
Curr. Price: $0.002071
Block Mining Reward: 10,000 DOGE
Ethereum has become the second-biggest cryptocurrency, and it is home to thousands of tokens. Like Bitcoin, it requires high processing power, but it is very stable price-wise; however, Vitalik Buterin, co-founder of ETH, is planning to make a shift to PoS for Ethereum. So the digital asset might no longer be minable soon.
Hashing Function: SHA-3
ROI since launch: +4,496%
Curr. Price: $130
Block Mining Reward: 2 ETH
Litecoin is one of the oldest cryptocurrencies created by Charlie Lee as a fork of the Bitcoin protocol. Litecoin is, however, different than Bitcoin as it uses the ‘Scrypt’ Proof of Work mining algorithm, which allows less powerful GPUs to mine LTC.
Hashing Function: SHA-256
ROI since launch: +856%
Curr. Price: $41
Block Mining Reward: 12.5 LTC
You might think the best GPU to mine is also the best GPU to use for anything else, but you would be wrong. For instance, one type of GPU could be only 0.1x times better than other GPU that is ten times cheaper.
The most popular GPU to mine cryptocurrencies is definitely the NVIDIA GeForce GTX1070, which again, is not the most powerful one as there is also a GTX 1080 and even 2080.
The GeForce GTX1070 is really powerful but quite cheap today as its price has gone down to around $300-400 and does not require as much electricity.
CPU mining is the original mining mechanism and uses the Central Processing Unit (CPU) to solve the complex problems presented in the mining process. According to their own definition, CPUs are suitable for rapid switching between different tasks, which means they can be well adjusted for any new type of work.
CPU mining was extremely popular for Bitcoin. However, it quickly became ineffective as more people joined the race to mine BTC. CPU mining was, in fact, removed from Bitcoin’s core. Some cryptocurrencies, however, are specifically designed to make CPU mining profitable; these include Monero, Electroneum, and others.
CPU mining was the first introduced method to mine cryptocurrencies but quickly became outdated as more and more people began mining. Now, some cryptocurrencies are building their blockchain in a specific way to allow CPU mining, sometimes to make it even more efficient than GPU or ASIC mining.
Electroneum is a cryptocurrency designed explicitly for CPU mining, and it’s based on the CryptoNote protocol. The primary mission of the protocol is to make CPU mining more efficient than GPUs or ASICs. It was also optimized to be used on mobile devices; in fact, Electroneum has an official android mining app.
Hashing Function: CryptoNight
ROI since launch: -50,5%
Curr. Price: $0.0034
Block Mining Reward: 7.346 ETN
Monero is a privacy cryptocurrency, and it is based on the CryptoNight algorithm. This protocol is resistant to ASIC mining, which means CPU mining is favorable. Monero has been consistently among the top 30 coins by market capitalization, and it is currently ranked 16th.
Hashing Function: CryptoNight
ROI since launch: +1,756%
Curr. Price: $45.9
Block Mining Reward: 3.41 XMR
Dash is still one of the most popular cryptocurrencies out there and has recently introduced a wide variety of innovative features like optional privacy or instantly settled payments. DASH can be mined using your CPU, and profits can be quickly sold because of the high liquidity the digital asset offers.
Hashing Function: X11
ROI since launch: >9,000%
Curr. Price: $40.5
Block Mining Reward: 3.11 Dash
Bytecoin is another CryptoNote-based cryptocurrency, and although it’s not CPU exclusive, users can still obtain decent mining rates using CPU. The digital asset is, however, a bit illiquid, which should be factored in before starting to mine.
Hashing Function: CryptoNight
ROI since launch: +353.2%
Curr. Price: $0.000296
Block Mining Reward: 440 BCN
In order to calculate your mining profit, you need to take in count 3 crucial factors, your average hash rate, your average electric power consumption, and the type of mining that you will be using. This is not the whole picture as you will also have to take in count the cost of your mining rig, account for exchange rates when converting your mined crypto into fiat, and more.
You can easily find mining calculators out there and other assessment tools like https://whattomine.com/, which allows you to check the difficulty, revenue, estimated rewards, and more of the top cryptocurrencies.
It is, in fact, possible to mine using your phone, this practice has only recently become popular as it is cheaper than buying a specialized mining rig and does not consume as much electricity.
Electroneum was the first cryptocurrency to launch a mobile mining app, but you can find plenty of other Android mining applications, although almost none for the iOS. Mining on your mobile phone can be fun and cheap, but it has many disadvantages too. Mobile devices are less expensive than mining rigs, but they can still be quite expensive, ranging from $200-1500. You will also be mining minimal amounts of cryptocurrency, and overall it is not the best method to mine cryptos.
Cloud Mining is the process of mining while sharing processing power. This allows anyone to mine cryptocurrencies without having to actually own any hardware as the mining rigs themselves are owned by the mining company in question. Users only need to register and purchase the desired mining shares or contracts.
Cloud Mining usually results in lower returns for the miner, but it is far easier to use. It is also far riskier as there are many cloud mining scams out there, which means users should be extremely cautious and always verify the company before purchasing any mining contract.
Clearly, cryptocurrency mining is still really profitable but also far more difficult for individuals looking to mine for fun. The mining of cryptos has become an industry, and the initial investment to start mining can be quite high. However, some cryptocurrencies are offering cheaper ways for people to mine cryptos using their CPU specifically.
There are many different ways to mine cryptocurrencies; you can do it through your GPU, CPU, ASIC, buying mining contracts through cloud mining, and even on your mobile phone. Whatever you choose, it’s crucial to verify that the service you are using is legit or has good reviews, it’s also vital to use crypto mining calculators to check your possible profit before starting to mine.
Now that you know how crypto mining works, are you going to start mining?