With the advent of the blockchain world, cryptocurrencies have become popular tremendously among people, all over the world. You have certainly come across different write-ups and videos about Bitcoin, Ethereum, Dash, and many other cryptocurrencies. Such content often emphasizes the idea of mining cryptocurrency.
Before we jump to the mining cryptocurrency process, let’s first understand what is a cryptocurrency? This is specifically for beginners who have no idea what this digital currency is all about!
Cryptocurrencies have become a subject of interest for investors, technologists, and financial institutions. This has increased their interest in crypto mining as well.
According to Verified Market Research, the cryptocurrency mining hardware market was valued at USD 1.49 billion in 2020. The market is expected to grow at a CAGR of 7.05% between 2021 and 2028. By 2028 , the crypto mining hardware market could be worth more than ~ USD 2.58 billion.
If you are also wondering about “what is cryptocurrency mining?”, ” How to mine cryptocurrency?” or “what are the methods of mining cryptocurrency?”, then you have landed at the right place. This easy guide for mining cryptocurrency for dummies will help you kick-start your journey towards crypto mining. Let’s move forward to learn more about this digital revolution.
What is Mining Cryptocurrency for Dummies?
Cryptocurrency mining refers to the validation of blockchain transactions for any particular crypto coin by specially designed computers that are also called mining rigs or nodes. For these computations, they get a mining reward accordingly.
You may presume crypto mining as a way to make or mine new cryptocurrency coins, however, it is not as simple as it seems. To know about this topic further, you must first understand about working of cryptocurrency transactions.
Cryptocurrency has no physical status and is fully digitalized without any possession and transaction in the real world. Additionally, it is not centrally controllable or issuable like a nation’s currency, for instance, the US dollar.
You will find no records stating the ownership and amount of cryptocurrency or any other transaction details among the cryptocurrency owners and dealers. Here comes the blockchain network, through which all cryptocurrency dealings are maintained in digital ledgers.
- Crypto mining Rigs and Node
Blockchains consist of costly networks of machines for verifying and storing transactions of cryptocurrencies circulating globally. Rigs, while using updated processors, act as a node in the blockchain network. It is not recommended to use a standard computer for mining cryptocurrency because high computational power is required for processing mining.
According to Digital Asset Outlook 2022 by The Block and GSR, the Bitcoin miners ‘revenue stood at USD 15.3 billion for the year 2021, while Ethereum miners’ revenue stood at USD 16.5 billion. When compared with the previous year, Bitcoin miners ‘revenue grew by 206%, while Ethereum miners’ revenue increased by 678%.
Methods of Mining Cryptocurrency
There are different methods of mining cryptocurrency. You can choose any of them according to your preferences.
- ASIC Mining:
Here, ASIC stands for “application-specific integrated circuit”. It is a device designed to mine any type of cryptocurrency. Although this method is expensive, however, it offers greater mining power with the highest possible hash rates.
- GPU Mining:
In this method, cryptocurrency is mined using graphics processing units or GPUs, also called graphics cards. The graphic cards work together under a single mining rig, thus providing high computational power. This method is expensive as the up-front cost increases.
- CPU Mining:
In this type of method, processors are used for mining cryptocurrencies. Back in the day, it used to be a worthwhile option, however, presently, very few people opt for this method of mining crypto. This is because the process is extremely slow. It takes months to earn a minute amount of revenue.
So, you might be wondering why people still doing CPU mining despite its cons? The answer is that anyone can start crypto mining with a desktop computer. The CPU miners are increasing day by day because this type of mining is easy to start.
- Cloud Mining:
One of the most popular ways of mining crypto is cloud mining. In this process, you have to pay an amount to a company and take their mining machine for rent, also known as the rig. Everything is decided as per contract, where revenue is transferred to your crypto wallet after deducting maintenance and electricity costs.
Those corporations that offer these services have very big amenities and several farms, and they are experts in mining cryptocurrency. You can go for both paid or free cloud mining. Generally, people choose free cloud mining, but the drawback is that the mining speed is very slow.
Whereas in paid cloud mining you find a cloud mining host that offers a customized plan for you and in return you pay them for their services.
- Mining only:
This is a mining procedure where you have to mine a cryptocurrency on your own. It is very difficult to earn rewards in this way.
- Mining Pools:
In this procedure, cryptos are mined by a group of people, and rewards are shared among these people.
If you are confused about what is the best procedure for mining crypto, then understand that all this depends on the cryptocurrency you want or afford to invest in. Mostly, people prefer a mining pool, GPU mining, and ASIC mining.
Steps to Follow for Mining Cryptocurrency
Now that you know about the basics of mining now it is time to discuss the steps involved in mining cryptocurrencies.
Step 1: Select a cryptocurrency
You can mine various currencies, but not all of them use proof of work or can have verified transactions. Some suggestions include:
- Dogecoin: Doge, also known as a meme coin, got very famous in 2021. You can make good profits by mining dogecoin with an ASIC.
- Ergo: You can mine this coin using the GPU method as it is resistant to the ASIC method. The Ergo platform is programmed to offer a useful way of implementing financial contracts on a blockchain network
- Kadena: This cryptocurrency is mined to power worldwide financial systems and for business. If you mine this currency with the AISC method, it can provide good profits.
Notes: According to crypto experts, you should not mine Bitcoin if you are a beginner because Bitcoin is very famous. Many miners are competing to earn revenue; thus, it is not easy to earn rewards through mining Bitcoin.
Step 2: Purchase a mining equipment
After finalizing the crypto coin, you want to mine, the next step is searching for GPUs or ASICs you can use to mine it. It is not advisable to use the CPU method because you won’t be able to make even $ 1 a day.
Use a profitability calculator to compare mining devices for the cryptocurrency you would like to mine. You can plug into the electricity cost and hash rate of the machine using these calculators and see how much earning is possible in one day. This information will help you to estimate the time required to pay off the mining device’s cost.
Step 3: Set up a crypto wallet
It is a must to have a crypto wallet because that is where you will receive the revenue made from mining cryptocurrency. It is not difficult to have a crypto wallet.
You can find a compatible wallet through recommendations from the cryptocurrency’s website. T here are several free digital wallets available. As soon as you have your wallet, an address will be generated where you can store your cryptocurrency safely.
Step 4: Set up your mining machine
Once you have your mining machine, you need to do a few things before starting the process. Firstly, download the software for the currency you want to mine. The software is available on the website of that cryptocurrency.
Ensure that your mining machine is placed at a location that has proper ventilation and cooling. This is because mining machines heat up very quickly. This can even lead to a fire if precautions are not taken.
Step 6: Connect with a mining pool
You can mine cryptocurrency on your own, but it is not an easy process and earning rewards becomes harder.
This is why people prefer to connect with a mining pool. There are members in a mining pool with the same goal to mine cryptocurrency. With their combined efforts, it becomes easier for the pool to have block validation and get rewards.
List of Mining Cryptocurrency in 2022
You can mine different cryptocurrencies. The absolute favorites are Dash, Ethereum, and Bitcoin. However, the issue is that it is most difficult to earn rewards from Bitcoin mining.
Bitcoin is the most popular coin and many people are already mining it. So, you will have to wait several months just to get a little reward. Therefore, it is better to focus on other coins instead of Bitcoin.
Thus, Ethereum comes at the top of the list of mining cryptocurrencies in 2022. You can also go with any other coin that is less popular. The choice of cryptocurrency also depends on the mining method.
Is Mining Cryptocurrency Worth it?
Yes! definitely. People have various goals behind mining cryptocurrency. For some people; it is a source of passive income, whereas, for others, it is a way of attaining more financial independence, without any interference from banks or the government.
According to Bitcoin.com blockchain predictions, the last BTC will be mined in the year 2140 . Almost 18 million Bitcoins have been mined so far.
The above stat shows that more and more people are taking interest in mining cryptocurrency. This is because it offers amazing financial benefits when done following the right method.
Mining Cryptocurrency: Wrap Up
It does not matter that you’re looking for a straightforward and secure way to purchase online products, you want to experiment with new technology, or you are looking for a way to invest and earn good profits, all you need is cryptocurrencies.
With increased security, low or zero fees, and instant settlements, online currencies are increasing in popularity day by day. Today, people are searching more about cryptocurrency trading and how to mine it.
This article provides detailed information on mining cryptocurrencies for beginners, so you must read it to start mining now and to be successful in it.