What Is Cryptocurrency Mining?
Cryptocurrency mining (crypto mining) is, in short, a race to the end for that photo finish. To extrapolate with more detail, it is a competition between various crypto mining computers (nodes) to solve massively complex math problems and operates under a “proof of work” concept (where, after solving said math problems, the work is verified and, upon its verification, adds to the block of transactions). For those that end up solving the problem and have been verified, block rewards are provided to the node that solved it.
To further elaborate, cryptocurrency mining is seeking to validate cryptocurrency transactions by identifying the appropriate 64-digit hexadecimal combination in competition with other nodes. Finding these hexadecimal combinations (also known as a “hash”), takes energy to solve. Imagine preparing for a competitive race and having a lean meal—this is intended to be digested for fuel, or “power,” for the runner. For mining, this is called “hash power,” or the fuel that your computer uses in order to provide solutions to different algorithms.
What is a CRYPTOcurrency miner?
Though the terminology may be a bit ambiguous, a cryptocurrency miner can refer either to the individual or the computer that is verifying and adding new transactions to the blockchain. The computer that is identified as the miner that successfully secures adding on to the blockchain then has the inidivudal behind the rig rewarded with some of the currency or transaction fees.
Is Crypto Mining Still Profitable in 2022?
Well, this actually depends on who you ask. The process of crypto mining can take a lot of time, be very costly (especially in energy and upkeeping your rig), and can often net very little, if no, rewards (since it is a competition and you may not be fast enough to solve the computation). Due to these considerations, it may or may not be profitable based on how frequent or infrequent these rewards are.
If we look at mining bitcoin and, subsequently, examine bitcoin as a reward for mining, we end up getting a hazy picture. For example, in 2009, mining one block on the bitcoin blockchain would earn approximately 50 bitcoins. However, over the years, these rewards have become lessened as the number of bitcoins becomes minted (because after every 210,000 blocks are mind, the block reward halves). Additionally, as there will never be more than 21 million bitcoins ever produced, these rewards will continue to halve into fractions of coins for miners.
On the one hand, people can look at the price of bitcoin and see riches for what they can earn (after all, as various crypto miners generates bitcoin passively for being part of the network, and as the available supply of bitcoin lessens, its value inevitably increases); however, this would largely depend on being successful within competitive mining—some indicate that for bitcoin, the cost associated with earning bitcoin rewards does not net nearly as much to warrant a considerable profit.
While people may have issues with bitcoin mining profitability, this is not quite the same for others. If we take a look at Ethereum, as an example, the range of profitability is vastly better (in fact, Ethereum is considered to be in the top 5 to mine for 2022 from multiple sources). However, this may all change with the advent of Ethereum 2.0.
How Does Bitcoin Mining Work?
Bitcoin mining is the process of having new Bitcoin enter into circulation having solved very complex mathematical computations. How this occurs is by validating bitcoin transactions on the bitcoin network (this is usually done by bitcoin miners with “mining rigs” that are geared to solve complex mathematical computations). It also assists in verifying the bitcoin transactions that occur on the bitcoin network.
The price of bitcoin has value intrinsic to how many Bitcoin are minted through the mining process in combination with the supply and demand of the market for bitcoin at that time. When there is less bitcoin to purchase as some computations take much more time to solve and mint, the value of bitcoin can go up as the supply is limited in comparison to the demand.
Why Is Cryptocurrency Mining Such a Big Deal?
Because it often helps with security. Since mining provides processing power to solve these computations, and because the solutions that the mining provides is then validated by other miners on that network, it helps to make the process much more secure as some rigs may think that they have solved the computation, notify the other rigs on the network, and may be invalidated. It also protects against fraudulent transactions or doubled transactions (removing the whole, “bank error in your favor” argument).
Since cryptocurrency is not decided based on any given central authority (because mining is based on that proof of work concept via a peer to peer networking) then there is no central decision-making source. The entire process is not only very transparent, but the process enforces, and reinforces, a verification mechanism. Without verification, or by having a central authority in making these kinds of decisions, fraud is easier to occur.
Additionally, to combat hacking, cryptocurrencies are often governed by machine learning algorithms that make it very difficult for hackers to break in (since they are released regularly). This doesn’t stop everyone, however. Sometimes hackers end up “cryptojacking” people’s computers through malware and malicious code that hijacks people’s computers to mine and then send these results to the hacker. For unauthorized mining detected, users can look at their CPU or GPU performance if their computer is particularly slow (a tell-tale sign).
What do I need to start mining?
Well, there is not much needed in terms of what is required to start mining; however, to stay competitive, it is paramount that the equipment itself can keep up with the competition. For that, it is important to invest heavily into your unit’s processing power. Central processing units already function on solving basic arithmetic, logic, input/output operations, etc. by a program. The program commands the CPU to direct its processing power to the whims of the application.
However, while central processing units can be an effective start, what would work better for processing speed would be with a powerful graphics card (and, in fact, there are specific graphics cards that are designed specifically for the use in crypto mining). The GPUs supplied from a powerful graphics card provides better speed and efficiency—two very key things to remain competitive for cryptocurrency mining. Yet, there are still other options with the differing kinds of asics out there (between an integrated asic or an applied asic).
An integrated circuit asic is like a “boost,” if you will, to rigs that have multi-function. Rather than constructing a rig for a specific use (and only that use), an integrated circuit is a chip that functions as an amplification or a microprocessor for your rig. However, because these rigs are meant for multi-function (not specifically used for mining crypto), there may be redundancies within it and, therefore, can divert some of its power consumption elsewhere.
Or, instead of getting involved with an integrated circuit, what you could do is invest into an application circuit asic miner (or application specific integrated circuit). These rigs are specifically designed solely for the purpose of mining specific kinds of digital currency (each one is tailored to a specific algorithm so they are highly efficient). They also have microprocessors, RAM, memory blocks, flash memory, and more integrated into its construction so all of the focus is rooted within its specific design. All of this means that application specific asic miners win out on lower power consumption and higher functionality.
