In
simple terms, cryptocurrency mining is the process in which new coins are
created through high-powered computers by solving complex computational
problems. Cryptocurrency mining is done in order to maintain the public ledger
of transactions upon which the currency is based.
Each transaction forms a part of a group collectively known as a block. These blocks are maintained by cryptocurrency miners and they are built on top of each other resulting in the formation of a chain. This is called the blockchain which is just a public ledger containing past transactions.
Miners have to solve these complex mathematical problems in order to earn a small scale of tokens. Mining the right cryptocurrency at the right time can fetch you a lot of money. It is important to learn about the process of mining before you decide to establish yourself as a digital currency miner.
Familiarizing yourself with the process
If you wish to become a cryptocurrency miner, then you’ll have to understand the different types of digital currencies that are available and what would you prefer to mine. Not every currency can be mined and the mining operation may differ from one currency to another.
Many big currencies of the world, such as Bitcoin, are uncovered through the process of mining. But bitcoin mining is comparatively less lucrative now because of many factors, including the increase in the number of miners, the increasing complexity of the process of mining and many more.
It is important to select the currency you want to mine because it will help you in choosing the equipment pieces that you may need for the whole process. Some of the currencies require powerful graphics hardware for mining and others may be more accessible in nature in terms of the equipment that you’ll be using.
Setting up the basics
To get established as a cryptocurrency miner, you’ll need a wallet, mining software and mining hardware. A wallet is required so that whatever tokens that you earn through the process of mining can be stored in one place. Wallets are essentially encrypted online bank accounts from where one can send and receive money.
Most mining software are easy to acquire and free to download. These can be found on different operating systems as well. Multiple types of mining software are available especially for popular cryptocurrencies like Bitcoin. These might differ from each other slightly in terms of conducting the mining operation.
Mining hardware includes high-powered computers and sometimes those computers which are specifically designed for the purpose of mining. These are quite expensive sometimes if you include the associated equipment, graphic cards, etc. that will be used during the miming process.
Looking for alternatives
New mining methods have sprung up in recent times as the traditional mining process of cryptocurrencies is now more expensive than before and competitive. The mining pool is a new way of mining that is now being popularised.
Mining pools consist of a group of miners pooling their computing powers and resources together in order to collectively mine for digital currencies. According to the amount of power each individual device was able to contribute to the process, the miners share the profits among themselves.
There are some pros and cons to this process. The disadvantage is that you will be earning lesser money in mining pools as the profits will be shared among the miners.
The advantage is that the initial cost of setting up the mining rig would be lesser and the work that has to be put in by each miner would be comparatively lesser too.
The mining business is a lucrative one as new and fresh ways of mining keep emerging. One needs to also keep in mind that many miners have faced a loss and haven’t been able to recover their costs with the output of their mining process.
In order to prevent that situation, one should be completely familiar with each and every step of the process.
Investing in cryptocurrency and starting a mining business can be a risky step if done without proper knowledge and precaution. Thus, one should take caution before taking any such financial decisions.
Written By - Himanshi Nebhnani
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