What Mining Is. Types and Methods of Mining
Cryptocurrency mining is an indelible and sufficient part to the industry while cases of possible making good money without leaving home coming into notice of a growing number of enthusiasts who are eager to join the movement. Many of them, however, do know nothing of mining: rigs, hashes, clouds – what on Earth is that? This article is to explain to you in simple words what mining is, how one can do it, whether mining rigs are necessary and what the variants for gaining cryptocurrency are.
It is to be asked first: why mining?
The necessity of mining derives from decentralized character of digital currencies that do not have central emissive and regulative body. Both functions are exercised by the community of users entering it on voluntary basis.
For cryptocurrency net to work steadily and flawlessly each transaction in it must be checked. Lacking of central monitoring body means it is the users who must verify them using their CPU capacities.
The point of verifying transactions with mining is that for doing so one has to perform specific calculations that are both time- and capacity-consuming as the process is a continuous searching of probable solutions. At that verification can be easily done.
In addition, cryptocurrency developers tackle another problem via mining, i.e. emission. The laws of economics do not allow issuing all coins into free circulation as offer in this case will be exceeding demand manifolds which devaluates the currency. Therefore, progressive issuing of new coins as the system is functioning is more reasonable.
That is where the two problems meet and get solved via mining: all miners who use their capacities for verifying transactions are rewarded with newly issued coins. Thus emission and verification are done on the proof-of-work basis.
There are two mining type classifications: technical and quantitative ones.
In the first classification equipment for mining makes the difference: central processing unit (CPU), graphical processing unit (GPU), application specific integrated circuit (ASIC), hard disk or solid-state drive (HDD\SDD).
CPU-involving mining is an obsolete method outdated some years ago which allows for poor profits: GPUs perform much more hash calculations than CPUs do. Of course, there are cryptocurrencies that are better to be mined with CPUs, but it is hard to find such ones, and, what is more, hope for nothing to make their rate collapse. Yet CPU-enabling mining is to be discussed later on.
In the early days of cryptocurrency industry GPUs replaced CPUs and turned to be a far more efficient technical solution for this. Moreover, it was graphic cards that allowed for constructing specific mining rigs as one motherboard can house several GPUs in a row.
Advantages of GPU-based mining include multitasking that provides for mining various cryptocurrencies at once. Building up a mining rig however requires specific knowledge as well as some manual skills.
Mining with application specific integrated circuits can in fact be considered as a professional one. These circuits are customized, “civil” use is almost impossible and is hard to implement at home for big noise and intensive heat release which demands good ventilation. What is more, these circuits have a restriction for exercising one task only which makes them usable for mining one cryptocurrency only.
ASICs however are the most productive devices for mining and allow for generating the largest amount of coins while fitting bitcoin mining most and thus providing for regular income.
GPU and ASIC consume power intensively, so if one is not keen to getting huge utility bills there is an option for mining with HDDs.
There are cryptocurrencies with verification process based on proof-of-space or proof-of-capacity method. The only thing needed from users is free HDD space: the more space is, the higher chances are for finding a block. HDDs unlike GPUs and ASICs are less power consuming which makes this kind of mining far more efficient.
The benefits of this mining may include simplicity as one can use smartphones even to mine cryptocurrencies with similar security systems, as well as efficiency which attracts environmentalistically thinking enthusiasts who refuse spending natural resources for mining.
No doubt, HDD/SDD mining has got its drawbacks with low incomes among them. It is quite easy to acquire several hard disks with 1+ TB capacity so that power costs will be small but the profits won’t be large: cryptocurrencies with security systems using this kind of mining are very few and unpopular. Bu if you got lots of free space on your HDD and don’t wish spending money for GPUs or, this is the way out that can help making some money.
The following classification for mining types makes distinction by the number of users: it is to differentiate individual, joint and cloud mining.
Individual mining is executed independently: a user launches their own mining machine and starts calculating hashes. This results in all pros and cons of the method: you are to gain the whole income yet it would be quite a task to get it as it is rather unlikely that it will be yours device that finds the correct solution rather than one from some mining pool. Using this method for some not that popular cryptocurrency, however, may well help getting into good money.
Joint mining is an alternative to the individual one and implies joining a mining pool. This kind of crypto mining functions on democratic foundation, each pool member gains cryptocurrency in amounts corresponding to the share of computing capacities enabled for a common cause. Given all that this type of mining is safer than individual one as payments are guaranteed for everyone.
Drawbacks for joint mining depend on a single pool. For instance, one of the world’s most popular pools, Slovenian NiceHash, was hacked at the end of 2017 with bitcoins to the tune of $64 mln being stolen.
In addition, some pools arose mistrust in crypto community for their huge size. Thus, the most prominent mining pool Ghash.IO got popular enough in summer 2014 to hold over 51% of bitcoin net capacities which threatened with 51%-attack. The pool managers promised reducing their share having set a 39,99% limit.
The third mining method is a cloud one. In fact, this one can be referred to both classifications as this is a completely universal way. The point of cloud mining is that a miner rents capacities at specific service.
Cloud mining can be split into the three kinds: hosting, virtual hosting and capacities renting.
The first one means that a user rents equipment owned by a service and may be located anywhere on the globe.
Virtual hosting is about renting virtual private server where a user may install their own software. User has to pay rent for the chosen server and start mining.
The third one is the most popular kind of cloud mining: a user rents a share of the service’s computing capacities rather than actually existing equipment.
Cloud mining is among the most controversial methods for mining as having both pros and obvious cons with the latter ones being explicitly significant.
The apparent benefit of cloud mining is that there is no need in purchasing and installing high-cost hardware, dealing with cooling and paying for electricity. If a user has got no opportunity for installing a mining rig for some reason yet is craving for joining crypto community making a contract with a cloud service is the only realistic option.
However, cloud mining has got an impressive list of drawbacks: mandatory depositing, restricted incomes, need in thorough service selection and concluding utmostly beneficial contract. Many companies offer only long-term contracts which means costs are to be recouped not any time soon. Crypto market volatility is also to be taken into account: it may result in a situation when cryptocurrency got devalued during the contract life and user suffered losses.
Moving on, the industry is infamous for numerous scam organizations that find devious ways for making money off of gullible users. To avoid it one has to scrutinize and analyze thoroughly the terms of the contract, look through reviews of former and current clients.
In general, one has to adhere to the basic security rules applicable for any money-related matter. There are also psychological flaws like absence of actual mining rig at your disposal.
Speaking on some specific cloud mining servers, Bit-Miner, Minersale, Hashflare, Hashnest really worth being considered. Choosing appropriate service is a highly sensitive issue that must be treated with maximum cautiousness and it is not about making a hasty decision.
Bonus: there is one more way for mining cryptocurrency used by fraudsters. It is called crypto-jacking and implies using special malware built into browsers and applications thus hijacking the victim’s capacities. That is where CPU capacities hijacking is the most widespread and allows for cashing in dozens of thousands of dollars on millions of users.
Tallying it all up, mining is still a beneficial case and when approached correctly may well help make good money. Of course, income share from mining hinges on funds invested and one won’t make a fortune from scratch. Good old days are gone. Crypto market, however, is quite unpredictable and awards enthusiasts as proven by its short-life history.