Modern Internet technologies provide an opportunity to earn money. Relatively recently, the online market has acquired a new way of obtaining foreign currency with its own requirements and rules.
If we transfer this process to computer technology, then we are talking about obtaining a virtual cryptocurrency.
In this case, there is no need to constantly be present at the monitor. The only limitation is sufficient power of the video card, processor, or the availability of special equipment. The essence of the process is the reproduction of cryptocurrency (in particular Bitcoin). Many computers use special software to perform mathematical calculations. The result is the emergence of cryptocurrency.
What is mining? What is the meaning of mining and why has it become so popular?
The word “mining” appeared a long time ago and meant the extraction of minerals. People who mine cryptocurrency are called miners.
It is impossible to say exactly when mining appeared, and there is also no reliable information about who and how invented it. There are several assumptions. Most people prefer the version that cryptocurrencies received their main development in 2008 and the Japanese Satoshi Nakamoto played a major role in this. In a short period of time, this method of earning money has gained many fans.
What is cryptocurrency?
Cryptocurrency is an electronic, digital currency that is becoming increasingly polarized.
It’s worth immediately establishing the difference between digital money on the Internet and Internet money such as (Yandex, WebMoney) they have their equivalent in rubles. The user can always cash them out and transfer them to the card. Cryptocurrency is a little different. Digital currency is based on encryption, cryptography. It does not have a physical embodiment in the form of coins or bills. The second difference is that cryptocurrency rates are not controlled by a single regulator, as, for example, the Central Bank controls the ruble. Like the supply of gold, the supply of cryptocurrency (in particular the most popular Bitcoin) is gradually decreasing. There are 21,000,000 coins in total. Of these, more than 2/3 have already been mined by users and are in circulation. The difficulty of mining increases as free currency decreases. Although there are other popular cryptocurrencies with unlimited money emission (for example, Ethereum), we will talk about them later.
The Bitcoin system marked the beginning of a new blockchain technology. This is a database with a clear structure and its own rules by which transaction chains and access to information are built. The advantage of technology is that it eliminates the possibility of theft or fraud. This is a kind of notebook that displays all the information about virtual currency transfers.
Consensus structure
So, we learned that blockchain is a system of consensus algorithms. Like any system, the blockchain has levels. There are only 3 of them:
- Consensus nodes (miners) – form the blockchain and group transactions into blocks.
- Audit nodes distribute the load across the network and check the work of miners.
- Light nodes - clients - do not have a full version of the blockchain (cryptocurrency wallets, programs).
The Bitcoin blockchain is the largest blockchain. More than 7,000 network nodes have a complete copy of it.
How mining works
In the process of servicing Bitcoin networks by users, new available coins appear. This is mining, the operating principle of this phenomenon. The main function of mining is adding transfers to the Bitcoin register. This requires performing complex mathematical problems that only powerful computers can do, which require a lot of energy.
Currently, it is simply impossible to mine bitcoins at home, alone, without special equipment. Therefore, a network of several powerful computers arises. Miners receive a reward that gets smaller every year. To constantly receive rewards, users join pools. This allows you to break down the task into small subtasks, which are gradually solved by the pool participants.
In order to know how to mine cryptocurrency, you need to understand the principles of mining:
- production is not regulated, the system cannot be blocked or subordinated;
- all transactions are strictly anonymous (no personal information required);
- the amount of virtual currency is strictly limited, it is impossible to get more than what is included in the settings;
- a virtual currency transaction cannot be reversed;
- It is necessary to have a powerful computer;
- You can use the money to pay for goods and services, or exchange it for rubles.
Many Bitcoin farms are located in China, close to inexpensive energy sources.
How much can you earn
The extraction of digital coins is influenced by many factors, for example: the quality of equipment, the size of the initial investment, the type of cryptocurrency and much more. Therefore, it is difficult to give an exact fixed amount of earnings. Only approximate figures can be given.
So, if a miner only has a gaming computer, electricity in his region is cheap, then he can receive up to $2 on average per day. Some beginners get nothing at all without powerful equipment.
With the help of mining farms you can earn more. But in this case, you will have to take into account additional expenses: electricity, which will obviously be consumed in larger quantities than from a simple computer, renting a room if there are several farms, etc.
Subtracting all expenses, it turns out that you can earn about 30,000 rubles per month. This is the average income of a miner who equipped farms. But taking into account the expenses on the equipment itself, you can get a net profit only in six months, plus or minus a couple of months.
Earned virtual money can be exchanged for real currency. There are several ways to do this:
- through exchange systems, in other words, exchangers;
- through a specialized terminal;
- using cryptocurrency exchanges.
What is cryptocurrency mining?
Mining the correct digital code is cryptocurrency mining. How does it work and what is the point of mining cryptocurrencies? – during the mining process, a structure is created to ensure the functioning of the entire system. During the collection of data on recent movements in blocks to solve complex puzzles, the first user to find a solution to the problem receives a reward - coins. The task comes down to selecting an encrypted code.
Who can mine cryptocurrency? Anyone who has the appropriate equipment.
You can increase the profitability of mining by creating an entire farm for cryptocurrency mining.
Today you can mine cryptocurrency not only in the form of bitcoins, but also in the form of other alternative virtual units. Example – (Zcash, Darkcoin, Etherium, Litecoin, etc.)
Decentralized distribution system
The task of the Byzantine generals:
In the morning there will be a battle with the enemy. The Byzantine army consists of several legions, each with its own general. All of them are subordinate to the Supreme Commander-in-Chief. Some generals of the legions are suspected of treason and interest in the fall of Byzantium. In the morning, everyone receives an order from the Supreme Commander-in-Chief: “advance” (against the enemy) or “retreat.”
Possible scenarios for the outcome of the battle:
- All loyal generals enter the battle - Byzantium wins (favorable outcome).
- All loyal generals retreat - Byzantium will retain its army without losses (intermediate outcome).
- Some loyal generals enter the battle, some retreat - Byzantium is defeated (negative outcome).
It must be taken into account that the Supreme Commander-in-Chief can also be a traitor and give different orders in order to achieve the defeat of Byzantium.
If each general acts independently, the likelihood of Byzantium winning is extremely low.
How should generals communicate and what decisions should they make?
This task reminds you of something, doesn't it? You guessed right. Transactions are a favorable outcome. Generals are miners. The Supreme Commander is the network. Blockchain, the system in which mining is carried out, ensures communications and does not allow traitors to carry out their malicious plans. An agreement between the generals and the Supreme Commander-in-Chief, in which a favorable outcome (transaction) is achieved, is called consensus.
Who pays for mining?
You might think that the essence of mining is getting money out of thin air.
A logical question arises: why mine? Which network participants need calculations performed by powerful computers? Why pay for this? It's simple. This is necessary for those who use virtual currency in their organization. It is important to understand that blockchain is not an eternal database. It can change and deteriorate over time. Only paying bills will help save information. If you remember the function of mining and how it works, you can understand who needs miners’ power and why. Connecting several machines into a network increases their power and increases the likelihood of a positive result, deciphering the code. During the operation, data is collected about the transaction and the movement of blocks of information, and blockchains are created. For this the person receives a reward.
Important tips for beginning miners. Read it!
If you were looking for information about mining for dummies, then of course we cannot leave you without advice from professionals.
- Always monitor the market situation! The price of a cryptocurrency depends on the news related to it. If you follow them, you will be able to predict this market, which means you will know which cryptocurrency is profitable to mine and which is not worth it.
- Always compare mining options - the cost and profitability of each device separately. Mining is not an area where you can do it by eye. Accuracy and strict calculations are needed.
- Strive for maximum equipment performance with minimal energy costs;
- When purchasing and assembling a farm, do not skimp. If possible, your choice should be parts from the latest production.
- When choosing devices, focus on maximum power. Again, if you are a teapot, you better find an adviser.
Types of mining
Anyone can start mining cryptocurrency. But the process is constantly becoming more complicated and requires greater computer power. There is a way out of this situation - everyone can connect to the network and provide their power to carry out mathematical calculations. This increases the chances of making money from mining.
The basis for making money from mining is having the necessary equipment. You also need to know mining algorithms. Users have come up with several ways to improve their work efficiency and get closer to solving the problem. If you have a desktop computer at home, you can mine if you have:
- Internet;
- special software;
- cryptocurrency wallet;
- powerful video card.
The first users began mining Bitcoin on processors. Now, generating income is possible with minimal equipment: Raderon R9 280 or GeForce GTX 1050 Ti cards and higher. There are no special requirements for the Internet; the process does not require high speed. The mining software is publicly available, and you can also download it from our website in the Miners section. Creating a wallet is not difficult; to do this, you will need to download it from the official website of the selected cryptocurrency, or use exchange wallets.
Types of mining:
- solo;
- in the pool;
- cloudy.
Solo mining
This is the process of mining cryptocurrency alone. This method will require from you either unprecedented luck, or enormous power comparable to other users. You can try solo mining; this method seems appropriate to me in the case of new, unpopular cryptocurrencies . This method has its pros and cons.
Pros and cons of solo mining
Before you decide to go solo mining, what do you need to know? Advantages of mining blockchains alone: you can start without large investments, parallel use of a computer for personal purposes, you do not need to share the reward received with anyone. The main disadvantage is that few people now manage to earn money this way.
With Bitcoin, this was only possible at the dawn of this technology. Back then, no special processor and video card power was required. As the number of participants increased, it became impossible to receive the award. Competition is increasing. Proof may be the fact that on the most powerful equipment it will take several years to obtain the award alone.
Mining in a pool
The development of equipment and the increase in complexity led to the emergence of mining pools. Single block decryption is no longer profitable and has become unprofitable. The solution was to combine user capacity into groups - Pools.
Pros and cons of mining in pools
Mining cryptocurrency in a pool increases the probability of finding a block several times. The server divides large tasks into subtasks that users solve. Each person's contribution is called a "share". This is a small part of the solved problem of searching and decrypting a valid block.
Today, a mining pool is a full-fledged business. The person organizing the process takes a commission from the participants. There are template programs and instructions for implementation. But attracting new participants to a newly organized pool is difficult. The pools that appeared first have become popular and offer attractive conditions. The main disadvantage of this option is the need to share the benefits between all network participants.
Cloud mining
The third method is cloud mining, how does it work? The miner uses a remote data center with shared computing power. There is no need to operate the equipment. This method is good for those who have high electricity rates.
Pros and cons of cloud mining
The main advantages of this method are simplicity and accessibility. It's easy to start mining cryptocurrency. No special skills or knowledge required. You just need to pay the service, buy out any “share” of the equipment and earn virtual money. However, the profit is less, there are many scammers on the network, and the equipment for which you paid will still remain with the service.
Instructions for earning money
Let's look at a short step-by-step instruction that beginners can use to start mining from scratch.
Step 1. Development of a business plan.
When developing a plan, consider the following factors that affect cryptocurrency mining:
- power, quality and quantity of equipment;
- exchange rate of the selected currency;
- cost of electricity.
Let's look at each of these points in a little more detail.
Step 2. Purchase and setup of equipment.
You can mine a decent amount of cryptocurrency and provide yourself with a good income using high-quality equipment. To do this you need to purchase:
- CPU;
- video card;
- high performance chip.
The processor can be useful when mining new, recently emerged cryptocurrencies. They don't have to be complicated! Only with this option will it be rational to mine them.
Otherwise, if there are many miners, the mining process will become more complex, as will cryptographic tasks, and more and more electricity will need to be spent. And then the use of the processor will be ineffective.
Video cards are needed to organize mining farms. With their help, the equipment's power increases, which leads to faster and more efficient mining. These details are used by experienced miners, because in order to monitor a mining farm, you need to have free time and knowledge.
In order not to spend a large amount at once, you can purchase video cards gradually. But before spending money on these parts, you need to find out whether it is possible to obtain the selected electronic money using additional video cards. For mining some cryptocurrencies, for example, Bitcoin, the method described above is not suitable.
To mine the most difficult currencies, it is necessary to purchase chips with high performance. This is what ASIC is. This is a GPU processor, the power of which is a hundred times greater than the power of video cards. They are very expensive, so they are mainly used only by large pools.
And in general, the greater the hype created around cryptocurrency mining, the more expensive the equipment. Prices for some equipment have skyrocketed 6 times or more. But the quality of the equipment directly determines the amount of virtual coins mined, so over time you will have to purchase good hardware.
Step 3. Organizing uninterrupted power supply.
The flow of electricity must be constant and powerful. Most often, especially if it is a mining farm, it is necessary to rent a separate room, since keeping all the equipment in an apartment is ineffective and also unsafe.
Do not forget to cool the entire structure, otherwise it may break from overheating or even catch fire.
Step 4. Selecting a suitable cryptocurrency.
You should mine liquid coins that can be easily sold later. If for some reason you mine a new digital currency, then after receiving it it is better to exchange it for more common money.
Or you can immediately change everything into rubles, dollars or other national currency. I do not recommend keeping mined coins for a long time. The rate may change at any time, and you will not earn anything.
Step 5. Evaluation of results.
You can talk about success or, conversely, failure in a couple of months. Analyze your expenses and income, think about whether it’s worth further developing and organizing mining farms or whether it’s better to do something else.
How to start mining yourself
Before you start mining virtual money yourself, you need to understand the mining mechanism. You can choose a popular mining pool and become its new member. If you decide to do this alone, you will have to spend a large amount on purchasing equipment. Due to high competition, solo mining requires strong capacities. It is believed that mining farms are a profitable option today.
Assembling equipment
What is the mining rig made of? This is one or more powerful video cards, a motherboard with memory and processor, power supply, risers, hard drive or flash drive.
No special equipment required. You must have stable (not necessarily fast) Internet, a registered wallet and software.
Deciding on cryptocurrency
There are a huge number of cryptocurrencies available for mining. The first and most popular is Bitcoin. You won’t be able to mine it with a video card; even a large farm won’t help. The solution is simple - mine other altcoins and convert them into bitcoin.
In current realities, I would highlight four main strategies for mining at low capacities:
- Mining new altcoins that are not yet listed on exchanges.
- Mining of new altcoins that have already entered the exchange.
- Mining cryptocurrency silver, such as Zcash (ZEC).
- Solo mining of new altcoins.
Pros: Slight complexity, in a short period of time you can mine quite a significant amount, and with the listing of the coin on the exchange and the appearance of buyer interest in it, you can get huge income. Cons: The project may cease to exist without appearing on the stock exchange.
Pros: You can immediately calculate your daily income, the ability to convert mined gold into cryptocurrency gold - Bitcoin. The likelihood of a price pump and, as a consequence, an increase in profitability. Cons: When a coin becomes very profitable, the number of miners increases, this entails an increase in the complexity of the network and, as a result, a decrease in profitability. Probability of a price dump on the exchange.
Pros: Stability. The rate follows Bitcoin. Cons: High complexity, low profitability. The likelihood of receiving excess profitability is extremely low.
Pros: Ability to draw a lottery ticket and solve the entire block at once. Disadvantages: At low capacities, there is a small probability of calculating a block, the income instability of this type of mining.
Personally, I use the first three strategies, diversifying capabilities and risks. This strategy more than pays off! There are small nuances when choosing new altcoins, such as the presence of a whitepaper, road map, etc. All this is necessary to reduce the likelihood that the project will turn out to be a scam, or simply cease to exist.
In the section of the site “What to mine” I will post instructions for mining new altcoins that I consider promising and use in my mining strategy.
Selecting a pool server for mining
The first pools that appeared quickly gained popularity and are now ready to offer attractive conditions to new participants. The main thing that I advise you to pay your attention to when choosing a pool is the commission and the actual number of coins received in your wallet.
Different pools have been proven to give different returns for the same commission; testing is needed here.
In the instructions for mining a particular coin, I will indicate the optimally selected pool.
Select an exchange or wallet where the mined cryptocurrency will be accumulated
An exchange is an online service where you can create a virtual wallet. This is a suitable option for those who want to make money from currency fluctuations. The main disadvantage is poor protection from hackers. All the funds obtained can be easily lost.
A virtual currency wallet can be local, online or hardware. A local wallet is a special program that is stored on a computer. The hardware wallet is located on the drive and connects to the network when necessary to transfer data.
Famous cryptocurrency multimillionaires
Popular geniuses who took advantage of the opportunities of exchanges in a timely manner were
- Eric Finman is an unremarkable student who earned his first million in Bitcoin mining when he was not even 20 years old.
- Jared Kenna, who invested $258 and sold Bitcoin a few years later, received $30 million.
- Yifu Gou, while studying at New York University, began mining crypts and, assessing the relevance of electronic currency, created a company offering ready-made Bitcoin miners.
- Fitz Hall, who, thanks to the bitcoins he earned, was able to earn his first million within one year. Now he is a successful businessman and investor who has not even turned 30 years old.
- Eliza Dadiani is one of the first girls who began mining cryptocurrencies and opened an art gallery with the money she earned. A special feature of this gallery is the ability to pay with bitcoins.
Knowing these stories, miners do not lose interest in mining cryptocurrency and continue their efforts.
Is it worth starting large investments in mining in 2022?
Let's remember where money comes from in mining. As for Bitcoin, today more than 2/3 of the total number of coins has already been mined and is in circulation. In 2022, the risk was worth it. The price of most cryptocurrencies has increased significantly. No one can say how likely a similar plot is in the new year. One can only speculate on the development of events. The transition from 2022 to 2022 was marked by a correction phase for Bitcoin, which is still ongoing. Profitability fell.
Before deciding to invest in blockchain anywhere, you need to calculate the profitability of the business. What type of mining is most suitable, what will bring income - everything must be calculated in numbers, any other approach is dangerous. It is necessary to evaluate the degree of complexity, the cost of equipment, programs, electricity. Profitability can also be calculated using special programs.
Cryptographic algorithms
Despite the fact that the problem of the Byzantine generals was solved back in the 90s, blockchain is a more complex task. 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. Read the article for more details about PoW and PoS.
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.
Well, then you know everything: the blocks are lined up in a continuous chain, the miners 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 - Bitcoin mining with pen and paper:
In addition to SHA256, the following encryption algorithms are known:
- Scrypt;
- ECDSA;
- SHA3-512;
- Equihash;
- Ethash.
Table. The most famous cryptocurrencies with types of algorithms:
A more detailed version of the table: Cryptocurrency mining algorithms
Platforms for exchange and trading
Withdrawing money from mining for further operations with it can be done in several ways:
- To a cryptocurrency exchange, for example, Binance;
- To online exchangers.
A convenient solution for finding a reliable exchange office are services that accumulate offers from various sites and provide users with the most up-to-date information about exchange conditions.
In the Russian-language segment, the most popular site is bestchange.ru.
Bestchange collects reliable exchangers and reflects their exchange conditions in real time: rate, withdrawal methods, reserves. All exchange services are checked before being included in the monitoring listing, so the likelihood of fraud is minimized.
Always remember safety. Therefore, after you have chosen an exchanger using LocalBitcoins or Bestchange, look for additional information about it on the Internet.
