What is the essence of mining? In simple words about the complex

Today you can hardly find people who have not heard about mining. The emergence of cryptocurrencies and their integration into the global economy has created incredible excitement. However, not everyone understands what mining is. This can create misconceptions not only about the process itself, but also about the prospects for currencies. In this article we will talk about the main technical features of mining, consider the principles of creating currency, and also evaluate the degree of profitability and future prospects of digital money.

What is mining

To put it simply, but not entirely correctly, mining is the extraction of cryptocurrency, most often bitcoins, which is explained by their greatest demand and popularity in the market at present. In essence, the owner of the computer, using its resources to operate the virtual payment system, collects and processes information about currently ongoing transactions with cryptocurrency. This activity is necessary to ensure that transactions are carried out, their security is ensured, and the entire peer-to-peer decentralized system functions smoothly. The greater the number of miners and, accordingly, computer resources involved in the process, the more reliable and stable the system’s operation.

How to start mining

To start mastering mining, you must first invest in equipment.

• You will need a good video card. Your earnings directly depend on the price of the video card. Look at the video card sales market. Most likely, you will not find a single top-end video card, because currently the “boom” in mining is forcing people to buy all new devices. However, you can try to track deliveries to Ozone or Wildberries
• If you purchased a powerful computer with a good video card in advance, then you need to provide cooling. You can regulate the mining load yourself in the application. However, in any case, it is better to open the door of the system unit and connect at least 2 coolers
• Mining does not require any effort from a person. You just need to go to the website https://www.nicehash.com/, check on the calculator how much you can earn per day on your device, and also register
• After registration, you need to install the application on your computer and smartphone to start mining
• While your computer is running, you will be able to track on your smartphone how much you have already managed to earn

Of course, start mining solo, i.e. on one computer, you can easily and simply. True, you won’t be able to earn much from this. Therefore, you can create a farm of several video cards that will work around the clock; or buy an ASIC and use it.

A mining pool is not available to everyone. After all, you need to trust your partner and be fair in any relationship so that there are no disputes in common activities.

We do not recommend cloud mining to anyone, because you may run into scammers. You will pay them rent, but most likely you will not receive any payments. The same risk exists with a cloud cryptocurrency wallet.

Principle of operation

For processing information, the owner of a computer resource receives a reward in the form of a commission assigned by the owner of virtual money, or a reward in the form of a portion of the cryptocurrency issued during the mining process. This is precisely what one of the main principles of operation of payment systems, which involve the use of bitcoins and some other virtual money, is based on. Those transactions with the highest commission are processed and carried out first. Therefore, transactions with zero commission can take a very long time.

Why does Bitcoin need miners?

It is important to understand that the widespread belief that the need for mining and, as a result, miners will disappear after the release of the last Bitcoin is extremely far from the truth. As already mentioned, no less important functions of mining are processing information, conducting transactions and ensuring the security of the payment system. Obviously, such work will always be required.

Why Bitcoin Needs Miners - Technical Details

Mining is the basis of the integrity and reliability of the Bitcoin system or any other cryptocurrency. The work of miners provides all the main functions of the network:

• Confirmation of transactions (transactions);
• Protecting the network from entering false information (fake transactions and blocks);
• Protecting the Bitcoin network from various types of attacks;
• Support for decentralization of the Bitcoin network.

A transaction between two participants in the Bitcoin network must be confirmed by participation in the block. If the miner who created the block accepted it and included it in the block, the coins contained in the transaction become available for further use. An attacker who tries to feed a fake transaction to the network will be rejected at the block generation stage.

Slip a whole block into the network? To do this, you need to have a signature generated on the basis of the previous block. If there is no signature, then it must be calculated - which means repeating the entire series of calculations that were needed for the previous previous block, and so on, right up to the very first block created on January 3, 2009. That is, in order to roughly hack the network and establish your own rules in it, you need to recalculate the entire blockchain.

An absurdly large amount of work - in fact, it is easier for an attacker not to recalculate the entire volume of calculations in the Bitcoin network for the sake of just one block - but to join his computing power in honest work.

Fork the block chain? This is possible, but such a branch is doomed to remain alone, orphaned - orphaned

, if you do not support it with ever-increasing computing power, greater than the total power of all “honest” miners, which also requires huge costs and is devoid of practical meaning.

With just a few hundred million dollars of hardware investment, you can have 51% or more of the computing power of the Bitcoin network. This attack is called the “51% attack.” But even in this case, the triumph will turn out to be, rather, a Pyrrhic victory. An attacker will only be able to “freeze” transactions on the network or arbitrarily change payments from his own wallet, which will not bring much wealth.

Decentralization, that is, independence from a single control center, is one of the key advantages of Bitcoin over traditional currencies, and it is provided precisely by miners who are dispersed throughout the world. Disabling part of the computing power will not lead to stopping transactions on the network - to do this, you need to turn off every single miner.

The concentration of power in the hands of large pools and data centers creates a certain threat to decentralization. But mining is spreading more and more widely and now there is no longer one pool that could receive more than 50% of the network. And data centers are dispersed across several continents - from Norway and Greenland to Australia.

Cryptographic consensus algorithms (Proof-of-Work)

Despite the fact that the problem of the Byzantine generals was solved back in the 90s, blockchain solves a more complex problem. All its nodes are in constant change mode. The cryptographic algorithms here are different from those used in the Byzantine puzzle.

Most cryptocurrencies use proof-of-work (PoW) and proof-of-stake algorithms.

Currency extraction based on PoW is usually called mining, while mining based on PoS is called forging.

The most common algorithm used by cryptocurrencies is SHA256.

The task of the algorithm is to hash blocks of transactions. SHA256 generates a 256-bit hash.

Next, the blocks are lined up in a continuous chain and miners who solved the correct hash receive their 12.5 BTC per block.

Mining speed is measured in hashes per second (h/s). As it turns out, the hash sum can be calculated with pen and paper. If we decompose the algorithm mathematically, we can achieve a speed of 0.67 hashes per day (with a 12-hour load, this is approximately 0.000016 h/s). However, most likely, this is not the best method of mining, because... Modern mining systems are capable of building blocks at a speed of several terahashes/sec, which is a quintillion times faster than a human.

VIDEO - the principle of encryption in the Bitcoin blockchain using pen and paper:

In addition to SHA256, the following encryption algorithms are popular:

• Scrypt;
• ECDSA;
• SHA3-512;
• Equihash;
• Ethash.

Read more about cryptocurrency mining algorithms in our separate material.

Bitcoin Mining

Of course, the most popular cryptocurrency today is Bitcoin (in English spelling - bitcoin), created in 2008-2009 by Satoshi Nakamoto. That is why, most often, the decision is made to mine this particular type of virtual money. However, it is necessary to understand that the flip side of popularity is the huge number of resources involved in processing information. Therefore, today, in order to really make money from Bitcoin mining, extremely large computing power is required.

Mining schemes

The simplest mining scheme involves installing special software on a computer, after which its resources are connected to the payment system.

State mining programs

Currently, interest in various cryptocurrencies has begun to appear in some countries at the state level. It should be noted that in most developed countries this sector of the economy is left to entrepreneurs. At the same time, in the DPRK, cryptocurrency mining is one of the important measures to support the national currency.

In recent months, there has been a serious interest in virtual money, primarily Bitcoin, and the process of mining it among the heads of domestic government authorities. Some senior officials have repeatedly understood the issue of developing government mining programs. However, it is still somewhat premature to talk about the actual implementation of these plans.

Mining Pools

An important operating principle of the most popular virtual payment system is the random distribution of issued bitcoins. In order to make this process more predictable and uniform, special online services were created, which were called mining pools. Individual users put available computing power at their disposal. Ultimately, the bitcoins received as emission remuneration are distributed among the members of the pool, based on its rules. Features of the software allow users to work in a pool much more efficiently than on their own, which has led to the widespread use of this type of mining.

Cloud pools

Today, in order to effectively engage in mining, serious computing power is required. Obviously, purchasing such powerful computers requires considerable financial resources, the availability of which is unlikely for an individual. As a result, a new type of pool emerged, called a cloud pool. It involves the purchase or rental of computing power from specialized companies that have the appropriate equipment.

In this case, all operations are carried out over the Internet, and the interaction scheme is as follows. The specialized company receives the funds from the client in the form of profit, which it needs for further development and acquisition of new, more powerful computers; the user has at his disposal the result of mining on the most modern and advanced equipment.

Hidden mining

Hidden mining refers to the use of someone else’s computing power to generate cryptocurrencies, primarily Bitcoin. This could be, for example, an employee launching the corresponding services on a work computer belonging to the company, or using special programs introduced in the form of viruses on third-party computers.

Recently, quite often there have been reports that some popular sites have also found elements of programs that allow mining by using the resources of visitors’ computers. Obviously, such activities can hardly be called legal. However, given the complexity of the issue, dealing with such manifestations is far from easy.

What is a mining farm?

A mining farm is a number of computers or servers combined into one system. At the same time, different equipment is used at different times and for different cryptocurrencies. In particular, for the “mining” of Bitcoin several years ago, mainly video cards were used, then they were replaced by specially designed processors (ASICs). At the same time, mining of some cryptocurrencies, for example, the second most popular Ethereum, is still most effective when using high-performance video cards.

Mining equipment

Simple mining schemes that were effective several years ago required the following equipment: 2-3 video cards, a motherboard, a processor, RAM and permanent memory, and a power supply. Naturally, to connect to the system it was necessary to install the appropriate software, which is freely available. An important resource that is consumed in large quantities during the mining process is electricity.

Mining programs

Currently, many different programs have been developed that can be used for mining cryptocurrencies. The choice of a specific product is determined, first of all, by the capabilities of the user’s computer. Obviously, for different configurations and computing power, the effectiveness of different programs will be different.

The simplest mining option is to use a cloud pool. In this case, the capacities of a specialized company are rented or purchased along with the software installed on them. However, in most cases the cost of renting or purchasing resources is quite high.

Is it profitable to mine yourself now?

Currently, it is unlikely that you will be able to make money from mining alone unless you have a farm. See for yourself:

• This is your electricity consumption bill. It can increase 2-3 times if you mine 24/7
• After a while, you may experience a problem with your computer. The video card can suffer serious damage due to overheating. You'll either have to sell it cheap and buy a new one, or just throw it away and buy a new one.
• You can’t earn a lot on one computer, because there won’t be enough power

So think a few times before you try mining.

Mining other cryptocurrencies

The popularity of Bitcoin, which it has gained in recent years, does not mean that this cryptocurrency will retain its leading position forever. On the contrary, many experts predict the emergence of new virtual money or the separation of any of the existing cryptocurrencies. An additional argument in favor of this is the fact that any virtual payment system is based, first of all, on user trust. Obviously, this is an extremely subjective factor that currently favors Bitcoin, but could very well turn against it.

Ethereum mining

In recent years, the rate of Ethereum (in Russia it is called ethereum or, even more simply, ether) has been growing at a fairly rapid pace, certainly inferior to Bitcoin, but at the same time being the second most popular cryptocurrency. Special programs are used to mine ether. It is important to understand that this process today is much more efficient than “mining” bitcoins, since a noticeably smaller number of users are involved in it. The most effective way is to use equipment in the form of high-performance video cards.

Mining Ripple

Ripple (XRP) is quite different from most cryptocurrencies, including Bitcoin. Currently, this virtual currency is popular, competing on equal terms with Ethereum. The main feature of Ripple is the impossibility of mining. This is explained by the fact that the developers immediately issued 100 billion units of XRP, keeping approximately 2/3 for themselves, and distributing one third among users. As a result, additional emission of cryptocurrency is not provided, and mining is also not required for the functioning of the system.

Litecoin

The Litecoin (LTC) cryptocurrency was created in 2011 and is a derivative (another name is a fork) of Bitcoin. Currently, its development is carried out completely independently and has several fundamental differences from the most popular type of virtual money. These include:

• Greater mining efficiency using powerful processors;
• The need for a large amount of free memory;
• Widespread use of pools, including cloud ones.

LTC is much less popular and in demand than Bitcoin. Therefore, mining this cryptocurrency is currently accessible and quite effective even for individual miners. However, it is much more profitable for the user to become a member of the pool, which significantly increases the profitability of mining.

NEM

Based on the NEM blockchain technology, a cryptocurrency called XEM was created. It is very popular in the Asian market, primarily in Japan. The peculiarity of this type of virtual money is the release of the entire amount of cryptocurrency at once. However, mining XEM is entirely possible. It is necessary to generate new blocks necessary for conducting transactions, generating corresponding records in databases and ensuring the security of ongoing operations. At the same time, XEM mining is considered one of the most democratic processes, since it does not require large computing power.

Dash

The capitalization of the Dash cryptocurrency, created in 2014, has currently exceeded $2 billion. Of course, its popularity today cannot be compared with Bitcoin, however, the virtual currency is showing stable growth. Almost any computer equipment can be used for mining, however, the most effective is the use of ASIC technology and various cloud services.

Iota

The IOTA cryptocurrency, which appeared on the market at the end of 2015, quickly became widespread. This is explained by the features of this payment system, the main of which are: the absence of commission for transactions and the speed of their execution. The operating principle of IOTA does not provide for the possibility of special mining, since in fact the user of the system becomes a miner when making any transaction, because this requires confirmation of the two previous ones.

ZCASH

The developers of the ZCash cryptocurrency declare it as the first anonymous virtual currency. This payment system provides a standard mining opportunity, for which you will need the appropriate equipment, first of all, a powerful video card, appropriate software and connection to the pool. It is in this case that mining will be most effective.

Monero

Mining a relatively new cryptocurrency called Monero can currently be a very profitable activity even for single users. The fact is that the payment system service does not allow the use of specialized ASIC processors. As a result, even with an ordinary, but quite powerful computer, you can mine Monero.

Stratis

The Stratis cryptocurrency (abbreviated as STRAT) appeared in 2016 and is one of the latest such developments that has already managed to make a strong statement on the financial market. The creators took into account the experience of using previously released virtual money, which allowed the newcomer to become one of the ten largest cryptocurrencies by capitalization almost immediately after its appearance. However, the excitement soon subsided and today Stratis ranks 16th in this indicator, which is an undoubted success, given the short time it has been on the market.

Cryptocurrency mining is carried out using traditional methods. For the process to be efficient, it is necessary to either purchase productive computer equipment or participate in cloud pools. Taking into account the opinion of experts, investments in Stratis may turn out to be very profitable even in the short term.

Where is the best place to buy cryptocurrency? TOP 5 exchanges

For a safe and convenient purchase of cryptocurrencies with a minimum commission, we have prepared a rating of the most reliable and popular cryptocurrency exchanges that support deposits and withdrawals of funds in rubles, hryvnias, dollars and euros .

The reliability of the site is primarily determined by the trading volume and the number of users. By all key metrics, the largest cryptocurrency exchange in the world is Binance. Binance is also the most popular crypto exchange in Russia and the CIS, since it has the largest cash turnover and supports transfers in rubles from Visa/MasterCard and payment systems QIWI, Advcash, Payeer .

Especially for beginners, we have prepared a detailed guide: How to buy Bitcoin on a crypto exchange for rubles?

Rating of cryptocurrency exchanges:

The criteria by which the rating is given in our rating of crypto exchanges:

• Reliability of operation
  - stable access to all functions of the platform, including uninterrupted trading, deposits and withdrawals of funds, as well as the period of operation on the market and daily trading volume.
• Commissions – the amount of commission for trading operations within the platform and withdrawal of assets.
• Additional features and services - futures, options, staking, NFT marketplace.
• Reviews and support – we analyze user reviews and the quality of technical support.
• Interface convenience – we evaluate the functionality and intuitiveness of the interface, possible errors and failures when working with the exchange.
• The final score is the average number of points for all indicators, determines the place in the ranking.

Which cryptocurrency to choose for mining?

Finding the answer to the question of which electronic currency is most profitable to mine is quite difficult. The fact is that the cryptocurrency market was formed only in recent years. It is constantly changing, in addition, new types of virtual money appear regularly. All this makes more or less accurate forecasting of the further development of the market situation extremely unlikely.

However, every year it becomes more and more difficult for individual miners to make a profit by mining the most popular cryptocurrencies, for example, bitcoins or ether. Therefore, it makes some sense to pay attention to equally popular types of virtual currency.

Mining farms: advantages and disadvantages

A mining farm is a combination of video cards and a powerful cooling system. The larger and better the equipment, the more active the cryptocurrency mining. Farms can be created either independently or purchased ready-made with an assembled frame and the necessary contents. The disadvantages of the company are the long payback period, the scale and bulkiness of the design (a one-room apartment is not the best option for a farm). Also, if you don’t know the intricacies of installation, you can simply burn out the microprocessor and video cards in a couple of seconds.

The positive aspects of cryptocurrency mining farms include:

• constant availability of video cards for sale;
• the possibility of reselling equipment to gamers;
• availability of a warranty period for the operation of the video card;

The main advantages of farms are high productivity compared to single equipment and, accordingly, a progressive increase in income.

Mining prospects

It is important to understand that with the growing popularity of virtual money, making a profit from mining becomes more problematic. This is explained not only by an increase in the number of participants, but also by the arrival of significant financial resources in this market segment. As a result, mining individually becomes simply unprofitable and unprofitable.

Another potential danger is the fact that some cryptocurrencies that have emerged recently do not provide for the possibility of mining. Such virtual money includes, for example, Ripple or IOTA, which have shown stable growth in recent years.

What does mining income depend on?

Users very often wonder what the income of mining depends on and, in general, is it worth doing? Let's look at what affects miners' profits.

1. Initial costs . How much will it cost to farm or rent a hashrate?
2. Cost of electricity . If you mine on your own, it is advisable to have access to cheap electricity.
3. Cryptocurrency rate . The cost of cryptocurrency greatly affects the profitability and relevance of mining.
4. Difficulties of mining . The difficulty of mining is constantly growing and therefore competition is greatly increasing. This growth will continue.

How much can you earn?

It is almost impossible to give an unambiguous answer to the question about potential earnings from mining. This is explained by the fact that it is determined taking into account many difficult to predict factors, including the current exchange rate of a particular cryptocurrency and the dynamics of its change, the size of investments in mining, the number of participants in the “mining” process, etc.

It is necessary to understand the following: the growth of the total capitalization of the virtual money market leads to the fact that the average payback period for investments is constantly increasing. For example, until recently, investments in Bitcoin mining were returned within 2-3 months, bringing further profits, and the entry threshold was quite low. Today, in order to start effectively mining the most popular cryptocurrency, a serious amount of funds is required, amounting to at least several thousand dollars. In this case, the payback period is 9-12 months, and in some cases even longer.

Hidden mining with a miner virus

There is also such a thing as a miner virus, this is a virus program that penetrates your computer and uses the processor power of the infected PC to mine digital currency.

Essentially, it turns out that the owner rented out his PC for mining, but the owner seems to be unaware and is not paid anything for this. As a result, the processor load slows down the computer greatly and it is almost impossible to run anything.

The miner virus can mine on other people's computers

The other day, a client called me with a request to clean her computer, since the system was very slow and nothing was working. I came and looked at the computer, and indeed it was impossible to even go into start and any folder on the desktop simply would not open.

After downloading a special disk, I discovered a virus called cryptominer and many incomprehensible folders, after deleting which the computer came to life and everything worked as before.

So keep this in mind and be careful when downloading all kinds of programs and games from the Internet.

Is mining possible without investment?

Currently, it is quite difficult to talk about serious mining without investments. At the same time, many companies providing cloud mining services are trying to increase the number of clients through various advertising campaigns. In some cases, users are offered the opportunity to “mine” cryptocurrency for free for a certain period.

There are also so-called cryptocurrency faucets on the network, which are advertising sites offering Satoshi, that is, a small part of Bitcoin, as a reward for visiting. This way to earn cryptocurrency is unlikely to be full-fledged mining, however, the number of such resources is increasing every year, which shows their demand in the market.

What is a pool and why is it needed?

At the initial stages of mining, it is difficult for beginners to get involved in the process. Novice miners do not always have the necessary good quality assurance. Therefore, those who are just joining a number of miners are recommended to join cloud pools. A mining pool is a server that brings together miners and their devices. By combining their efforts, miners decrypt the hash code needed faster than a miner who works solo.

There are also advantages for miners who create pools. Pool owners become real businessmen who make money from the work of others. The pool organizers charge a commission on the coins earned by the pool miners. On average, the commission fluctuates in the range of 0.3-2%. Often, in addition to the official commission, pool owners fraudulently underestimate the amount of computing power expended by an ordinary miner. Therefore, the main disadvantage of mining pools is the possibility of manipulation of the actions of miners by the pool organizer.

Possible problems and pitfalls

The main potential problems with any cryptocurrency are two factors. Firstly, the legal status is unclear, which also varies from country to country. In today's global financial market, this is a serious obstacle to further growth.

Secondly, the main condition for the popularity of cryptocurrency is trust in it. This criterion can hardly be called stable and objective. Therefore, any problems that arise can easily bring down even the most popular cryptocurrency.

How to make money from mining and withdraw money?

We discussed above how the mining process occurs. Therefore, we know that in order to receive a mining reward, 2 conditions must be met: verification of a 1 MB transaction and solving a complex mathematical problem. And if the miner and his equipment are the first to find a solution, then the miner receives a well-deserved cryptocurrency.

Earned currency can be exchanged for real money. There are 3 ways to exchange cryptocurrency:

1. through exchange systems (“exchangers”);
2. using a specialized terminal;
3. through special exchanges.

Exchangers are very simple and easy to use. There are many exchanger options available. Each miner chooses an option that is convenient for him. To carry out an operation through exchange systems, you will need to indicate the amount of the amount to be withdrawn, card number, email address and, sometimes, full name. The disadvantage of exchangers is the limitation of the amount of money withdrawn. To withdraw through exchanges, you need to create your account, transfer cryptocurrency to fiat currency, and only then withdraw money from the selected exchange.

P.S

The end of 2022 and the beginning of 2022 promises to be very productive for new card models. With the advent of each new card or miner programs - and maybe even new algorithms - the balance of power may change significantly, so the article will be actively updated as new data becomes available.

The material was prepared by Denis Trushin, head of the advanced technologies development department of ADM-Techno LLC.

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Benefits of Rave OS

Rave OS is a system for miners that allows them to control what is happening with mining farms from a distance. At the same time, the developers promise mining stability, high hashrate and minimal downtime, which usually lead to losses.

You can manage three devices for free, and if there are more, each will cost $2 for a month.

The main advantage of the system is its simplicity. To install, just burn the image to a medium and connect it to the device. After this, the system will automatically detect the equipment model, select the appropriate settings and allow mining. In addition, Rave OS has a large community, which means there are plenty of combinations of overclocking options.

Conclusion

So, in simple words, a miner is an ordinary person who mines cryptocurrency using one of the above methods. All he does is assemble a mining farm (video cards or ASICs) or buy cryptocurrency using the POS algorithm.

Further, as in the first example, the program itself does the mining; all you need to do is download it, configure it and run it. That's it, nothing more is required from you, cryptocurrency mining is underway.

In the second example, you just need to buy coins and receive interest for it, like in a bank, and after the purchase and before the actual sale, you also don’t have to do anything, the coins themselves will be “mined” - generating income in the form of interest.

Factors influencing cryptocurrency earnings?

Cryptocurrency mining is influenced by 4 fundamental factors:

1. power and number of video adapters (the better and more video cards and processors, the more income);
2. current exchange rate of the crypt against the euro, dollar or ruble (that is, the ratio of income and minimum profit, taking into account payment for electricity);
3. demand for a “mined” coin (the higher the price of the coin, the more difficult it is to mine against the backdrop of great competition);
4. cost of electricity consumption (a high price for electricity will limit the miner’s capabilities and reduce his income).

After just a couple of months, you can analyze whether this type of income is suitable for you or not, whether it is worth developing further and creating “farms” for mining crypts.

What about investment risks?

Like any investment decision, spending on mining requires balance and a sound assessment of the opportunity. To minimize the risk, I recommend that novice investors pay attention to the following points: popular cryptocurrencies like bitcoins take an extremely long time to generate and the costs are high. Dreams of “solo mining” at home are very vague, because specialized equipment requires considerable expenses. Less popular digital currencies have a low exchange rate relative to the US dollar, which means they reduce the profitability of mining. Not a single cryptocurrency has any material or guarantee. This is a completely virtual product and does not have official status in many countries. Before you start mining, you should study the whole process in detail yourself and then decide. That's all! Thank you for your attention!

If you want to follow the latest news in the field of crypto and new projects, then I advise you to subscribe to the Telegram channel , there is a lot of useful information there. I wish everyone a great day!

Four main patterns of mining

There are the following mining features that dummies should know:

1. Known currencies are more difficult to mine than little-known ones;
2. Cryptocurrency is not backed by anything. Its rate may rise or fall significantly, and, accordingly, your earnings too. You need to watch the news.
3. The greater the computing power, the greater the chance of finding the right solution;
4. Earnings depend on investments and, of course, legislation and news background. Rumor has it that they want to ban mining?

Encryption algorithms

Depending on the type of cryptocurrency, the encryption algorithms associated with it may vary. It is by decrypting them on their equipment that miners receive their reward and ensure the stable operation of the entire blockchain infrastructure.

The most popular and reliable encryption algorithms in cryptocurrencies:

SHA-256

The encryption algorithm is used by Bitcoin (BTC), the most popular and expensive cryptocurrency that has gained widespread popularity. To decrypt this algorithm, it is best to use ASICs. This algorithm is also used by a number of cryptocurrencies that copy the structure and principles of Bitcoin, such as BitcoinCash.

Scrypt

This algorithm is used by the Litecoin (LTC) cryptocurrency. In its early stage, it was a very “convenient” algorithm for mining. But after the development and implementation of ASIC-Scrypt, mining the Litecoin cryptocurrency became virtually inaccessible to ordinary miners due to its high complexity.

Ethash

Otherwise called DaggerHashimoto, it is an algorithm that is used in the Ethereum (ETH) cryptocurrency. To mine this cryptocurrency, you will need a powerful video card with a large amount of memory. The best choice is video cards on an AMD chip with a large amount of memory.

X11

The encryption algorithm used in the Dash (DASH) cryptocurrency. Deciphering this algorithm is quite accessible to modern high-end video cards. In 2022, ASICs appeared on sale that can work with this type of encryption.

Decred (Blake256)

A modified algorithm known as Blake256. Used in the cryptocurrency of the same name, Decred (DCR). It also mines perfectly on top video cards. Mainly mined in parallel with DaggerHashimoto. Uses Claymore Dual Miner program.

CryptoNight

Cryptographic algorithm used by the popular anonymous cryptocurrency Monero (XMR). A special feature of this algorithm is its good performance on central processors. The results when mining on a processor can be very good.

Equinhash

This algorithm is used by highly specialized cryptocurrencies Zcash (ZEC), Zclassic (ZLC). Quite a popular coin, which is quite possible to mine on video cards.

The Future of Cryptocurrencies in relation to the World Market

The prospect of the practical use of cryptocurrency on the World Market depends on the decision of the people who govern the policies of the countries, their views and vision of such a currency. Japan is the country that has officially recognized Bitcoin. The authorities of the Republic of Belarus have recently legally approved the possibility of receiving, selling and purchasing cryptocurrency by individuals. But at the same time, the Chinese authorities have completely limited the ownership of virtual coins.

They want to offer Russians an analog version of the popular cryptocurrency, which will be controlled by the state authorities. This idea remained under consideration for a long time and did not have a solid legislative basis, without which it would have been impossible to begin the development and operation of an analogue. The legislative project “On the development of the digital economy” was adopted recently. EU countries are also actively discussing this topic. The introduction of Bitcoin as an official currency is a proposal from the European Union that continues to be considered.

Considering the position of the cryptocurrency, it is impossible to speak unequivocally about a favorable forecast, because mining is an uncontrolled independent process and it is impossible to predict success. The decision to start mining is controversial, because there are positive and negative sides to this process. But while Bitcoin is growing, miners continue to mine it and other cryptocurrencies, and withdraw their earnings to their wallets.

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What influences the price increase

Of course, this is the price of video cards and other mining equipment, utility costs (after all, the equipment works 24/7). The cost of mandatory regular maintenance, repair or replacement of components. At first, miners have to work hard to get a return on their investment. The duration depends on the complexity of the algorithm. The simpler it is, the more interesting it is from a financial point of view to do it. Determining monthly income in numerical terms is quite difficult. This depends on the stage at which the miner connected to the general network.

Mining in Russia in 2022

There is still no accurate forecast for digital currency mining in Russia. There will most likely not be a complete ban on cryptocurrency. Mining will probably be officially recognized in 2022. However, it will be controlled: cryptocurrency and transactions with it will be subject to taxation. There are also other bills that may come into force. For example, they may ban mining in apartment buildings due to excessive load on the power grid. In addition, it is planned to create a national cryptocurrency.