Mining: What You Need to Know
Bitcoin and cryptocurrencies took the world by storm, and by late 2017, most people were scrambling to get onboard before this new tech moons. If you are as inquisitive and experimental as myself, then you may have probably tried mining Bitcoin and other cryptos with your CPU and even mobile device. One of the most common questions I get asked is what mining is and if it is still profitable. This article will answer these questions on mining.
What is Mining
The simplest way to understand mining is to think about how new currencies such as the dollar or pounds are created. Basically, mining with regards to cryptos means creating of new cryptocurrencies by solving complex mathematical algorithms.
Bonus Tip #1: The higher you go on a chain, the harder it becomes to mine for cryptocurrencies. Mining difficulty is periodically increased to keep the network stable.
Mining is the backbone of many blockchain networks. Miners confirm blockchain transactions and provide security for the network. For their service, they are rewarded with newly-created cryptos (depending on the network), and transaction fees. Without miners, it becomes easy to attack a network.
Miners and mining performs 3 core functions in any network.
- Issuance of new coins
- Confirming transactions
Bonus Tip #2: For Bitcoin, miners are rewarded new bitcoins every 10 minutes. Miners cannot cheat the network because they have to use their computing power to generate new bitcoins.
Bonus Tip #3: Payments with zero confirmations can still be reversed. 6 confirmations are the standard for most transactions to be considered secured.
Bonus Tip #4: The only way to reverse a blockchain transaction is to have more than 51% of the network’s hash power. But a distributed hash power spread keeps the network safe.
Is Mining Still Profitable?
Before answering this question, it is important to note that there are different methods or rather devices for mining, and this affects the profitability of mining. There are coins that support CPU mining, GPU mining, ASICs, and even mobile devices. For this reason, it will be unwise to think you will get the same reward mining a coin using a CPU, in comparison with using a GPU or ASICs.
So, depending on the coin you are trying to mine and the hardware, you are using, mining may not be profitable. For example, you can’t mine bitcoins with a CPU (although this was possible in its early stages).
Getting Started Mining
Mining Hardware: As I already noted, while it is possible to mine some cryptocurrencies using mobile devices and CPUs, it is mostly a total waste of time. Taking Bitcoin for example, it may sound funny that you can mine bitcoins on Android devices using apps like Crypto Miner and Easy Miner. But here’s the reality, you’ll likely make less than a dollar if you mine for the whole year. This is because these devices are not powerful enough to match the mining hardware used for serious mining operations.
To start mining, you need an ASIC or GPU miner. ASIC are specialized units that are built for the sole purpose of mining a particular cryptocurrency. Meaning, they can’t be used to mine other cryptos. GPUs on the other hand are graphics card and can be used to mine a handful of cryptos.
Join a Mining Pool: Unless you join a mining pool, you will only be rewarded for blocks you found (this is called solo mining). Solo mining is not recommended because your hardware’s hash rate may not be powerful enough to find a block solo mining. By joining a mining pool, you get a reward that is equivalent to what you contribute.
In general, this is as easy as it gets. What really matters is how deep your pockets are and what is your purpose for mining.