What is mining, what are the types of mining and is it possible to make money on it?
Apparently, only the lazy have not heard about cryptocurrency mining. From time to time there is news that someone sold bitcoins and bought an apartment in the center of the capital. Or that it is now profitable to invest in ethereum. But how mining works, and whether it is possible to earn on mining in 2022 to the user without experience in IT and without serious investments
Cryptocurrency mining is the process of creating digital currencies. But you should not compare it with the issuance of money, because mining has certain functions and tasks for the performer. The fact is that most cryptocurrencies operate on the principle of decentralization. This means that all transactions in the network are not processed by any one central authority, for example, in the form of our usual National or Central Bank, but by any user connected to the network. And in order for users to be motivated to spend their time and computer power to process transactions - the system creates and charges the miner a reward in the form of cryptocurrency or part of it for a certain number of processed transactions.
But not everything is as simple as it seems at first glance. Most cryptocurrencies run on blockchain technology, ie each transaction contains information about all previous transactions in the network since the creation of the digital currency. Therefore, the complexity of processing transactions with cryptocurrencies is constantly growing, in addition, the reward is only one miner who first processed the transaction. Thus, mining is not speculation and play, but serious work that requires some knowledge; an investment that can bring both profit and loss.
Is it possible to make money on cryptocurrency mining?
When Satoshi Nakamoto launched bitcoin in 2009, a home computer with a medium-power processor was enough to handle transactions. But, after 1.5-2 years with the growing popularity of cryptocurrency and, accordingly, the number of transactions, increasing the complexity of calculations required more powerful equipment and as a result, calculations began to be performed on video cards. In 2012, one computer for processing network operations was no longer enough - the era of mining farms - installations that connect many video cards, and then - ASIC pools, equipment from many components, sharpened to process a particular algorithm ( mining of a certain cryptocurrency).
Thus, the cost of equipment needed for effective cryptocurrency mining is increasing, and today can be tens of thousands of dollars. In addition, such equipment consumes a lot of electricity to operate and requires additional cooling of the system. On the other hand, the exchange rate of many digital currencies has already reached its peak, and the price of them drifts in a sideways trend, making such currencies less attractive for investment.
Therefore, if in the years of the emergence of cryptocurrencies, their investments could be recouped in a few weeks, now it will take several years. And mining has become like a serious investment, and its owner has to analyze many factors for decision-making: the dynamics and prospects of cryptocurrency growth, the complexity of its mining, the cost of mining equipment and its technical characteristics, local electricity tariffs and others.
And, of course, investing in mining is a bit of roulette, because there were cases when the price of cryptocurrency fell several times in a few days, and beginners, on the contrary, soared in value for a week. This adds uncertainty to this area of investment.
Types of mining of digital currencies
Depending on the hardware and software used for mining, as well as the type of their owner, mining is divided into: CPU mining, GPU mining, ASIC mining, cloud and browser mining, mining on laptops and communicators, etc. Consider these types of mining in more detail.
Mining on the CPU
Processing mining (CPU) was relevant 10 years ago, at the dawn of the first cryptocurrencies. However, currently the CPU capacity is not enough to process data on transactions with cryptocurrencies stored in long chains of the blockchain. And this type of mining is considered only for cryptocurrencies - newcomers to the market who do not have a long history of operations, and, accordingly - with a high speed of transaction processing. And also for some cryptocurrencies, the processing algorithm of which is more located before mining on the processor, for example, Monero, Dash, Litecoin, etc. At the same time, according to experts, one powerful processor is unlikely to bring more than 30-50 dollars a month in mining.
The fact is that the CPU core can handle only four or eight 32-bit operations per clock, depending on the CPU frequency. For example, video cards designed to process a variety of graphics data are able to process 3,150 pieces. 32-bit operations over the same time period. It turns out that mining on a video card (GPU) is hundreds of times faster (respectively - more profitable) than on a processor.
But if you have already decided to switch to CPU, we recommend choosing a powerful processor that has high performance : good frequency and number of cores, cache size, low power consumption, the ability to work with encryption SSE2, AES, etc. Processors from Xeon were considered the best option, and equipment from AMD or Intel (i3, i5, i7) was also a good investment. But, do not be lazy to look on the forums for features of the purchased processor for mining the desired specific cryptocurrency.
It is also important to choose a good program for mining digital currency. Some of them allow you to run both on the processor and video card. Good programs are Wolf's CPU Miner, Nheqminer, CPU miner, they can be downloaded on the Internet in free access, for example, from Github.
After that, you need to install an electronic wallet, which will receive cryptocurrency obtained during mining. It must be compatible with the mining program. After registering and syncing your wallet, you will need to create a file with the extension bat, and you can start mining. This is a file format in which the basic parameters of the mining procedure are prescribed. This manipulation can be done in a regular notebook file, which after entering the required code, save in bat format.
Mining on GPU
Mining on a video card is now one of the most popular and relevant types of cryptocurrency mining, as it provides a high speed of transaction processing. After all, GPUs were developed to process a large amount of the same type of video data, which is similar to the process of extracting digital currency. It should be noted that for such mining will be effective full-fledged discrete graphics cards, rather than integrated into the processor video chips on laptops.
The best video cards for mining bitcoins and other cryptocurrencies are Nvidia models: 1060, 1070, 1080 TI, as well as AMD: RX 470, RX 480, RX 570, Rx 580.
There is a temptation to overclock the video card to the maximum with the help of special software, but this threatens at least the loss of warranty on the card, at most - its breakdown. Therefore, it is important to be careful here, and at least pre-read reviews of the accelerator program on technical forums. One of the best applications for this purpose is the MSI Afterburner accelerator.
You can exchange any currency on the video card, but some of them are better, as they have a more GPU-friendly algorithm. Old algorithms are not sharpened to work with video cards, so they can take a long time to process. The flagships of the cryptocurrency market, such as bitcoin, Litecoin, Dash and Dogecoin, one video card may not pull. Processing of their transactions is already done with the help of ASIC - special complex computer equipment, honed for mining a specific cryptocurrency. This technique costs thousands of dollars.
Cryptocurrencies based on CryptoNigh encryption, such as Monero, Bytecoin Electroneum, as well as Equihash (Hush, ZCash, Bitcoin Gold) and Ethash (Ethereum, Ethereum Classic), are best suited for GPU mining. For maximum profitability, experts recommend using a system of 4-6 video cards for mining.
ASIC mining
With the transformation of mining into a business of industrial scale and increasing competition (because the reward is received only by the miner who first processes the transaction), there was a need for specialized equipment for cryptocurrency mining. It became the Application Specific Integrated Circuit, abbreviated - ASIC, which translated from English means "special purpose integrated circuit". This is a chip sharpened to calculate a specific algorithm for mining a particular cryptocurrency. For example, modern cryptocurrencies are based on the calculation of the following algorithms: SHA-256 (Bitcoin, Bitcoin Cash, Syscoin, Namecoin), Ethash (Ethereum, Ethereum Classic, Ubiq), Equihash (Zcash, Komodo), X11 (Dash, Pura), Scrypt ( Litecoin, B3Coin, Bitdeal), Blake (2b) (Decred, Siacoin) and others.
From a technical point of view, ASIC miner consists of: board, memory unit, connectors for connecting external devices, fan and housing. Unlike GPU processors, ASIC mining is more productive and consumes less power.
When ASICs appeared, they were small and connected to the main computer via a USB port. But with the increasing complexity of calculations and increased the size of ASIC equipment. So, industrial options the size of a small table, cost thousands of dollars, consume more than 600 watts of electricity, have increased volume and require additional cooling systems.
The highest quality ASIC equipment is offered by PinIdea, Bitmain, Ebang Communication and Baikal. When choosing an ASIC, first of all you should pay attention to the hash rate, which determines the power of technology, and hence the speed of cryptocurrency mining in the future.
To install ASIC hardware, you must:
- Connect the power supply to the housing and control panel of the system
- Connect the network cable to the router
- Make a control start - the indicators will light up, the cooling system will start working
- Find out the IP address of ASIC equipment, for example, using any browser to go to the router's page
- Go to the web interface of the miner and select the pool to work, the download frequency microprocessor, boot power, if necessary - update the firmware
- Save settings and reload ASIC hardware
- Start mining
- The return on investment in ASIC equipment depends on many factors. Yes, you need to take into account: the hash rate (speed) of technology, the adequacy and correctness of the configuration of mining equipment, the complexity of mining and the dynamics of prices for a particular cryptocurrency.
Fortunately, all sorts of online mining calculators will help you make the necessary calculations. To do this, open one of them and enter some introductory data. These can be: the name of the cryptocurrency for mining, the cost of your equipment, the cost of electricity and others, and in just a few seconds you will know the planned return on investment. The norm is now a 2-year payback period, with the most successful investments usually pay off in a year.
Cloud mining
With the growing complexity of handling cryptocurrency transactions and, consequently, the cost of mining equipment, many miners have become obsolete. On the other hand, mining has always been a business with a share of uncertainty, because the rapid fall of the cryptocurrency may cancel all business plans, which has happened more than once in modern history. This problem has given rise to cloud mining, when large, industrial miners lease some of their equipment online to small miners through special programs.
For this purpose, some investors have even started to set up large mining companies (farms) in favorable locations, such as coal mines in Iceland, where there are no difficulties with cooling equipment, and to lease some capacity around the world. At the same time, experts from such companies study the dynamics of the value of cryptocurrencies, look for promising newcomers and have several of the most profitable digital currencies.
All this makes investing in cloud mining the most profitable investment in cryptocurrency mining in 2020. Some of the companies advertise a return on investment of 20-70% per month, but this figure may fall sharply with the digital currency.
To connect to cloud mining, you need:
- Evaluate the offers on the market and choose the best option
- Determine the power and calculation algorithm (cryptocurrencies) that are needed
- Choose the lease term. Usually cloud miners offer to sign a contract for 1 year, but there are also offers on the market for 6 months, 2 years or indefinite
- Pay the cost of rent and commission for the transaction
- Receive regular charges from the company for cryptocurrency mining.
- Be careful when choosing a cloud company, as there are scammers or losers in the market. Some companies are just waiting for enough trustworthy users to "wash away" with investors' money. And no one can give 100% protection from hacker attacks.
Therefore, when choosing a company for cloud mining, pay attention to its openness (availability of the site, posting information and photos of existing facilities, blogging by company experts), the duration of the company in the market, the proposed choice of cryptocurrencies for mining.
Given the many years of experience of companies in the market, we can advise the following companies in terms of cryptocurrency mining: bitcoin - IQ Mining, Ethereum - CCG Mining and IQ Mining, Dogecoin-Genesis Mining and others.
Browser mining
With browser mining, you open a page on the Internet that uses your computer to mine cryptocurrencies, for which you are paid a fee. It is very convenient, simple, and does not require additional knowledge or investment. However, since the PC that is connected for mining usually does not have the necessary capacity and does not contain the necessary equipment for mining in the form of a farm with 4-6 video cards or ASIC-block, the service charges an additional fee. Therefore, it is unlikely to make money on browser mining. At best, if you have a good computer, this income will be enough just to pay for Internet access. This makes browser mining interesting only for beginners who have no idea about cryptocurrency mining, but want to try this business, but do not want to invest in it yet.
If you decide to try, we recommend choosing simple and new cryptocurrencies for mining with easy algorithms for transaction processing and a small chain of previous transactions. These are the digital currencies Monero, Litecoin and Feathercoin. FreeBitcoin, BrowserMine and WebMining are among the most popular and reliable sites for browser mining.
Recently, the activity of fraudulent transactions has increased, when the site connects your computer to browser mining secretly, uses its power, and does not share with you the reward for the work done by your equipment. This can happen, for example, if you accidentally clicked on a pop-up button on a site or went to a site from a SPAM newsletter. The first signals of such an unscrupulous connection will be raising your laptop even on simple tasks To protect yourself from such fraud - connect your computer to one of the locking programs, such as AdBlock or UBlock.
Mining on laptop
Mining on a laptop is similar to mining on a personal computer. The only fundamental, significant difference is the lower performance of the laptop compared to a full-fledged PC, in particular, the often trimmed version of the video card, which may be represented by a built-in chip in the microprocessor, rather than a full version of GPU.
Therefore, mining only makes sense on expensive professional laptops or gaming cryptocurrency options with low transaction processing complexity (simple encryption algorithm or newcomers to the market: Ethereum, Monero, Equihash and Litecoin).
Using mining software on a laptop is similar to a PC, but there is one significant difference. Due to their compactness, laptops have limited cooling systems. Therefore, when setting up mining equipment, set a lower critical temperature to turn off the laptop or set a partial use of the power of your laptop.
Mining on Android and iOS phones
Cryptocurrency mining with smartphones is even less productive than laptops. However, the growing popularity of cryptocurrencies and the emergence of interest in mining among many, makes this type of mining in demand.
To start mining, you need to install a special application on the communicator from PlayMarket or AppStore (for example, MinerGate, NeoNeonMiner, ARM Miner, Quarry, etc.), or use browser mining. Currencies with low transaction processing complexity are suitable for such mining: Electroneum (ETN), Aeon (AEON), Monero (XMR) and Bytecoin (BCN).
However, as it turns out, the practice of making money on mobile mining will not work, such a hobby will be more like an introductory practice of cryptocurrency mining, to make further decisions, such as investing in cloud mining or creating a GPU farm.
Results
Summarizing the above, we can recommend investing in ASIC-equipment, if you are familiar with hardware, software and cryptocurrency prices. If you are not an IT specialist, but have an investment vein - invest in cloud mining. If you have neither the knowledge nor the extra money to invest in cryptocurrencies, you can use browser mining, or use your PC, laptop or even smartphone for CPU or GPU mining. And the sooner you make such a choice - the better, because every day the complexity of most cryptocurrencies is only growing, and there are alternative investment options on the market.
You can also familiarize yourself with fraudulent brokers.
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