What is Cryptocurrency Mining? Best Practices On Mining Cryptocurrencies
Anyone new to the world of cryptocurrency has their fair share of questions, and rightfully so. But the most commonly asked question from newcomers always seems to relate to the process of mining cryptocurrency – what does this mean, and how can you mine for something digital?
These are valid points deserving a comprehensive answer, so that’s what we’re here for today.
In this article, we’ll spell out the definition of cryptocurrency mining, explain why it’s useful and important, and offer some best practices and tips for those just getting into the scene as a hobby or legitimate venture. Let’s begin.
What is Cryptocurrency Mining?
To the absolute crypto beginner, the best way to explain cryptocurrency mining is a digital reward system for dedicating computer resources to a decentralized network that facilitates fast, secure transactions.
In other words, every ounce of processing power you devote to the technology that powers crypto, you earn a bit of that specific currency in return. Every crypto miner provides a service, and they are compensated with coins, tokens, or other digital stores of value.
No, it’s not quite like mining for copper or gold in the veins of the earth, but there are a few similarities worth noting. Let’s get into some key terms in blockchain technology and explain the process of crypto mining in a bit more detail.
Basics of Blockchain
To get a better grasp on crypto mining, it helps to have a basic understanding of blockchain technology.
Picture a blockchain as a massive database, but instead of all the information stored on one server or hard drive, the data is spread throughout millions of computers across the planet in a decentralized manner. These devices are known as nodes.
While some nodes are passive participants, others are actively working to strengthen and improve the blockchain by solving ultra-complex problems known as hashes. These are the cryptographic functions that give the currency its name.
As transactions are performed within the network, these hashes become longer, more complex, and more difficult to crack. More and more computing power is required to verify these transactions by solving these equations.
The nodes that are providing this computing power to crack codes and build blocks? These are the miners that get rewarded for their efforts by providing the right answer and conveying “proof-of-work” to the rest of the network.
Why Crypto Mining Matters
If you managed to make your way through that barrage of tech terminology, here’s what you really need to know. Simply put, crypto miners are the ones that do the heavy lifting for the blockchain, and gradually make the technology stronger, faster, and more secure.
In the ever-unlikely scenario that every crypto miner shuts down right now, the blockchain would stop in its tracks and no new coins would be “printed” for circulation.
You can now see why crypto mining is such a key component to blockchain technology in a broader sense is. While currency is the main application at the moment, countless other use cases are slated for this technology, from logistics and tracking to voting and verification.
Remember, crypto mining is the process that makes the whole operation run quickly and smoothly, and given the popularity of these digital assets lately, there is plenty of interest from the masses.
Getting Started with Crypto Mining
Here’s one of the best parts about crypto mining – pretty much anyone can do it and be an active part of this digital currency revolution.
From a bedroom in the suburbs to a city-center apartment to a massive data center millions of miles away, each device is essentially performing the same function, with the same goal, at the same time.
Here is what’s required to get started crypto mining and some best practices to bear in mind.
Hardware and Setup
When crypto mining first emerged onto the tech scene, hobbyists and forward-thinking ventures used every type of computing resource they could get their hands on.
These early adopters would create Frankenstein-style rigs to squeeze out the maximum amount of power despite clear limitations in efficiency, design, and practicality.
Now, things have been sorted out in terms of hardware, and GPUs (graphics cards) are thought to be the best resource for entry-level mining. However, ASIC (application-specific integrated circuit) units are thought to be better options for larger operations.
While these technologies are not cheap or always energy-efficient, they are the ticket to a source of relatively passive income that could be well worth the investment sooner than later.
Hardware is just one part of the picture, of course. Depending on the type of unit in question, there will be different software and setup processes required to jump into the crypto mines. Setting up a wallet and joining a mining “pool” is suggested for more consistent profits.
This used to be more of a mystery for first-timers, but now, there are plenty of tutorials to be found online, and many ASIC units also come with some form of propriety software that allows for plug-and-play mining capabilities.
Tactics and Strategy
We’ve described a small home or business setup for crypto mining, but this is just one way to go about it. Many cloud computing companies now offer hosted crypto mining services, allowing investors to get into the game without filling their closets with overheating ASIC miners.
But regardless of your approach to mining, there is a high degree of strategy involved. As even the most casual crypto observer has noticed, cryptocurrency prices fluctuate greatly and the marketplaces never close.
Smart miners are highly attuned to the trends of the market and know when to ramp up or dial back resources on a certain coin. Many miners are also involved in trading and exchanging currencies, adding another layer of complexity to best practices.
Thankfully, you can take crypto mining as seriously or as carefree as you want – it’s all what you make of it.
Upcoming Trends in Crypto Mining
Crypto mining is finally hitting its stride in 2021, but as so many in the community like to reiterate, it’s only just getting started.
Here are a few trends in crypto mining that everyone should keep on their radar no matter what level they’re at.
New Coins, New Territory
The Bitcoin behemoth is still topping charts and making headlines, but in just the past 12 months, the altcoin marketplace expanded rapidly by tens of billions of dollars.
This huge spark of interest shows that Bitcoin is just the tip of the iceberg, although the currency is still known as “digital gold” for a reason – there is only a finite amount to be had!
ESG Bitcoin Mining Ramps Up
Many recent public battles have been fought over the sustainability of Bitcoin from an energy perspective, and only a few industry leaders have come forth with a plan to address these concerns.
Gryphon Digital Mining turned the tables by announcing a commitment to achieving a 100% renewable energy supply for crypto mining – the first of its kind.
As the energy conversation heats up, investors should look behind the scenes keep a close eye on the source of energy running the show.
Be on the Cutting Edge of Crypto Mining
We’ve just barely scratched the surface on a topic deserving of a stack of textbooks. Still, this quick overview of crypto mining should give you a good foundation on which to build your crypto knowledge.
The crypto industry moves fast, so get up to speed and enjoy the ride!
Sources:
What is Crypto Mining? | Infosec Insights