We can confidently predict that cryptocurrencies will not go away anytime soon. Blockchain, the underlying technology that underpins several cryptocurrencies, has gone well beyond the digital currency business and is expected to find new uses this year. 

Cryptocurrency miners have risen dramatically in recent years. Some of them make succeed and some of them failed. In this article, we compiled a fundamental cryptocurrency mining guide for beginners. Before jumping into the guide itself, it is always better to understand the definition of cryptocurrency mining. 

What Cryptocurrency Mining Means

Cryptocurrency mining is the process of a high-powered machine verifying a cryptocurrency transaction to get a cryptocurrency reward. The solution process includes verifying data blocks and adding transaction records to a public record (ledger) known as a blockchain.

A miner is a network node that gathers transactions and attempts to group them into blocks. When you make a transaction, the miner's node will capture and validate the transaction before adding it to the memory pool and putting it into a block containing many transactions. 

A transaction hash (txid) is a unique identifier used to differentiate one transaction from another and it is the first stage in the mining process. A transaction for which coins suddenly appear, it’s usually the first transaction in a new block. This is called the Coinbase transaction.

After every transaction is hashed, these hashes are organized into something called a miracle tree or a hash tree, meaning the hashes are organized into pairs and then hashed until the top of the tree is reached, this process is also called Root Hash or a Merkel root. The block's header contains the root and hash from the preceding block and a random number called the nonce.

The block header is then hashed, producing an output that will serve as the block’s identifier that must be less than a specific target value. In other words, the blocks must start with a certain number of zeros. The hashing difficulty’s scale, the rate at which new blocks are generated remains proportional to the amount of hashing power in the network.

The miner repeatedly hashes the header by iterating through the nonce until one miner in the network eventually produces a valid hash. When a node obtains the correct hash, the founding node broadcasts a block to the network, and the other nodes will check for validity and add to their copy of the blockchain before moving on to mining the next block.

How to Start Cryptocurrency Mining For Beginners

Picking the right machine is fundamental for cryptocurrency mining for beginners, as mining is no longer an easy task. People started optimizing their computers by using the GPU (Graphics Processing Unit) to make them more efficient. High-powered gaming computers have these graphics cards, and they’re much better at mining bitcoin than CPUs.

Some people in fact started to build a customized computer specifically for cryptocurrency mining using an FPGA (Field Programmable Gate Array). However, customizing hardware using FPGA is complicated, they never really take off except in some fringe cases. It turns out GPU mining is still far more reliable than FPGA.

The top-notch and most popular machines to this date are, ASICs ( Application Specific Integrated Circuit). ASICs are the most powerful tool out there for cryptocurrency mining for beginners or experts because their special-purpose machines are explicitly designed for this task. 

But there are some drawbacks to consider by using these high-performance machines. Since the computer works on a heavy workload, it generates an enormous amount of heat that can reach a hundred degrees or more Fahrenheit. This heat will then increase its surrounding temperature thus making it unpleasantly hot.

To overcome this heating issue, these machines are equipped with cooling systems such as fans. When the fans are working to cool down the machine, these machines, unfortunately, make a pretty loud noise that can be very disturbing. You might want to have a dedicated space at home where it’s secluded and has reliable cooling systems.

Alternatively for beginners, you may want to consider hosting or colocation in a mining facility. They store your machine and send the profit you are mining.

Another bummer of ASICs is their lifespan. You need to keep upgrading your equipment to stay competitive with your ASIC. 

Also, ASICs are specialized machines to mine a specific cryptocurrency, so you can’t repurpose them to mine a different coin. A bitcoin miner will only be able to mine bitcoin, and an Ethereum miner will only be able to mine Ethereum. If you change your mind, you’re stuck with a useless piece of machinery.

If ASIC is too much for you, you can always repurpose your gaming computer and use the GPU power with software like the NiceHash miner, it will automatically switch to mine the most profitable currency. 

NiceHash will bounce around a bunch of different coins, they’ll mine and convert them to Bitcoin for you, so you’ll only get paid on Bitcoin. if you’ve got a computer with a graphics card in it and it’s been built in the past like five or six years, run that, that’s great to do it for cryptocurrency mining for beginners.

You can also use your computer to mine certain coins considering ASIC resistance, like Minero directly. You can mine Monero with your computer's CPU/GPU. This has made Monero a viable alternative to cryptocurrency mining for beginners and anyone who doesn’t want to pay a large sum of money to begin mining.

Is Cryptocurrency Mining Profitable

If you want to gain as much profit as possible in cryptocurrency mining, you have to ensure that your miner doesn’t cost more to run than the amount you earn in mining. You’ll need to look at a few things—the use of electricity that eventually leads to the cost, and the maximum hash rate or the machine’s efficiency.

There are a lot of miner calculators where you can map out the numbers and see whether what you’re doing will be profitable. WhatToMine will give you a breakdown of a specific graphics card or specific ASIC. It will ask you what coin you wish to mine, your power price at the place you’re mining it, and give you a breakdown of how much it costs to run per day.

To gain the most profit, you want to look for the most hashes per second at the lowest amount of energy usage. Ideally, you can search and find a location with a cheap energy cost.

A Miner should begin with a few machines and scale up from there. The recurring expense that can be very expensive is generally the cost of energy, and it can rise up even more as people tend to buy additional gadgets to expand their mining operations. Finding an alternative source of energy such as solar power can be one solution to this.

Essentially, the more people competing for mining rewards on the network the more difficult it is to mine. 

In this cryptocurrency mining guide, we know how it works and what is the best way to obtain cryptocurrency but the question is, which coin represents the best opportunity for profit?

Sometimes it is more profitable to mine cryptocurrencies that aren't popular. For example, one of the most profitable miners at the moment is Goldshell KD5 which is used to mine Kadena. You can make around $5,000 per month with Goldshell KD5.

Another good method for beginners is to mine in a pool rather than solo mining. When mining in a pool, profits are split based on computing power. For example, if miners contribute one percent of total computing power, they will receive one percent of profits minus any fees.

Bitcoin’s price is on a spectacular rise, with a value increase of more than 340 percent in the last year. Simultaneously, in 2020, the hash rate of bitcoin climbed up by more than 41%, reaching roughly $63,500. You need to know a few additional intricacies in Bitcoin mining, tracking whether it is profitable is a tough task.

It's still tough to track whether it's profitable. Although Bitcoin can be tough to obtain, still most GPUs may be used to mine Bitcoin while ASICs have recently gained popularity. Approximately 900 bitcoins are mined per day at the moment, and according to this ratio, 328,500 bitcoins will be produced by the end of 2021. The block reward has been fixed at 6.25 and will not change until the next halving.

Ethereum in 2020 started at $125.63 and ended the year at a closing price of  $729.65, a roughly 500 percent increase. It briefly reached $4,380 in 2021 but has since ranged between $1,700 and $2,500, frequently climbing or declining by $1,000 in a single week.

Many estimates are positive, with average year-end targets of $3,500 to $4,500 and average long-term expectations of $11,170 by 2025.

According to Wallet Investor's algorithm-based forecasting site, the price of Monero might grow to $332.3 by the end of 2021 and continually grow to $483.5 by the end of 2022. In 2026, it has the potential to break above the $1,000 barrier, reaching as high as $1,024.5 by the end of the year.

Conclusion

Although solo mining provides the potential for better rewards, the odds of this happening are substantially lower than when mining in a pool. Today's most prominent mining pools are f2pool, Antpool, and ViaBTC. You should also look for currencies with lower hash rates so that you may easily represent a more significant amount of hashing power inside a pool hence obtaining a large portion of profit once it's realized.

Cryptocurrency mining for beginners can be profitable if you can follow these strategies; Electricity cost-efficiency, reduce or find a location with a cheaper energy cost, switching to alternative energy sources - e.g. solar power, mining unpopular cryptocurrency, or joining a mining pool.