Cryptocurrency Mining, How does it Work?

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18

Jan

The global adoption of cryptocurrency has led to widespread demand for tokens, therefore mining has become harder, complex equations have to be solved by computers before they receive a block reward and these gets harder as more blocks are found.

Technically, anyone with a computer and an internet connection can become a miner. But before you get excited, it’s worth noting that mining is not always profitable.

Depending on which cryptocurrency you’re mining, how fast your computer is, and the cost of electricity in your area, you may end up spending more on mining than you earn back in cryptocurrency.

As a result, most crypto mining these days is done by companies that specialize in it, or by large groups of individuals who all contribute their computing power.

Your mobile phone or personal computer does not stand a chance as it competes with modern dedicated ASICs(Application Specific Integrated Circuits) in calculating complex equations to discover a new block. This is because your earning depends on how much power(hash rate) your CPU contributes to the mining process.

So, if you want to make big bucks mining cryptocurrency, you would have to set up your mining rig, connect to a pool and go to work.

Here, newbies are faced with another difficulty, as traditional mining with rigs, ASICs require lots of technical know-how, not to mention lots of cooling and ventilation, electricity costs and 24/7 workload. It is quite difficult to keep profits ahead of electricity and cooling costs while mining traditionally.

In a nutshell, if you’re going to try to use a CPU or laptop, joining mining pools are going to be a possible option and even then you’re not going to be making much if any, as your contribution to the mining pool’s mining power will be limited at best, which leaves you with cloud mining as the only real option unless you’re willing to invest in the hardware and accept the electricity costs that come from all year round mining and that’s before the necessary upgrades and new equipment that is to be expected with overuse.

Cloud Mining

Cloud mining is supported by mining companies setting up the mining rigs at their own facility, with a cloud miner only needing to register and purchase shares or a mining contract. The user doesn’t have to do anything else, with the mining company doing all the work and giving the cloud miner returns on a regular basis. The user essentially buying a proportion of the miners hash power.