While the world is going crazy behind blockchain and cryptocurrencies, there must be a thought of trying your hands on this alluring technology in your mind too. Owning this growing digital asset and that, as an early adopter is a benefitting idea, which needs precautious implementation.
It will be better if you understand the Blockchain technology, its ups-downs, how to mine bitcoins or other cryptocurrencies, what will you need to do so, and so on. This will help you succeed in making a significant profit while handling this decentralized currency. Here’s your quick primer on Cryptocurrencies and mining:
What is cryptocurrency?
To say it with easiest terms – Digital cryptocurrency is a virtual asset, which assures secure transactions. The fascinating quality of cryptocurrency is that it’s not regulated by any government or third-party. The same makes it a capable future currency for everyone.
You might have heard about bitcoin, the first decentralized digital currency, launched in 2009. However, there are many more types of cryptocurrencies available in the digital world, like Bitcoin, bitcoin cash, Ethereum, DigitalNote, LiteCoin, altcoins, and PotCoin.
Technology behind this Digital Currency – Cryptography
Cryptography is a combination of mathematics and computer science. A complex uncrackable coding is done for exchange, purchase and transfer information securely. The technique controls the creation of additional units & verifies the mode of transaction. Cryptography techniques were used for a secure exchange of information and data, at the time of Second World War. Nowadays, it is using for secure transfer of information and money.
The transaction of cryptocurrencies takes place in an end-to-end user network (between two users) by using cryptography technique, without any medium of bank or intermediate. These transactions are verified and recorded in public distributed ledger i.e. a blockchain (a secured list of records called as a block.)
What is cryptocurrency mining?
In traditional fiat money culture, money is printed under govt. permission as required. But in Digital cryptocurrency world, money is not printed at all. Computers all around the world search it and keep a transaction record. Your machines perform complex operations to solve the computation problems to earn rewards and coins. This process is called as cryptocurrency Mining. It can be done in groups as well as alone.
The miners repeatedly update the blockchain by searching latest broadcast transactions into a new group of transactions or block. Each block is added with a previous block cryptographic hash using the SHA-256 hashing algorithm to form a blockchain.
Cryptocurrency can be obtained in two ways:
- By cryptocurrency mining.
- By purchasing virtual units from physical units.
People transfer the bitcoin across the world at all the time. But, as it is a decentralized transaction system, it is necessary to maintain a record of the participants. The cryptocurrency network stores these records by broadcasting and collecting all the transactions details during a set period into the block. Miners first verify the transactions and then it is recorded on the blockchain or public ledger.
How it Works?
A mathematical proof of work is required to find a number of the nonce, to make an easiness to reach difficulty target. The proof of work protocol strengthens to solve billions of complex mathematical problems in a second. So, by having a stronger POW protocol, more cryptocurrency can be earned.
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Prerequisites & Essentials for Cryptocurrency Mining – What do you Need?
Mining software requires a special hardware that is fabricated to solve the complicated mathematical problems and new issues. If cryptocurrency news inspires you to mine, you should arrange the followings as the priority:
- A customized computing Device and Hardware
You must have a specially designed computer system or desktop for cryptocurrency mining because normal computers, laptops or other gaming consoles are not efficient to perform while the miner is running.
- Right Location
Select a location where you can get all the resources like internet speed you can install AC, electric charge in that area. Make sure it is budget-friendly.
- ATI GPU
As a dedicated miner, you must have ATI semiconductor based graphics processing unit devices i.e. ASIC chip (application specific integrated chip).
- A Software Bundle
As I’ve suggested you to try pool mining, Stratum, cgminer, bfgminer are some pool supporting mining software to rely upon. Pick easy to use software with a simple user interface, when you are beginning.
- Membership of Pool and Currency Exchange Groups
Pools are the miners’ communities to combine their computers for increasing their profit. That gained profit in virtual currencies can be exchanged into physical currencies and vice-versa. For these, you’ll need membership of online pool and exchange programs.
- Sound Knowledge
If you really want to earn a profit by mining and it’s not just for hobby, you need to research on better techniques. Keep yourselves updated with cryptocurrency news. You have to spend hours passionately on improving your learning by doing.
- Digital Wallet for Coins
You need a secured, password-protected coin wallet or private database to store your earnings and profits. There are various hardware, software and paper wallets for that.
- Secure and Speedy Connection
To enjoy crypto mining, you should have a really faster (2 Mbps) and secured internet connection. Otherwise, you will end up wasting your precious resources for less earning.
- Cooling Mechanism
It is necessary to cool-down your hardware because hardware dissipates the moderate amount of heat. To overcome the shortcomings during mining, keep the resources in any cooling fan or air-conditioned room for mining purpose.
Is it good to mine cryptocurrency?
Cryptocurrency mining is good to earn incentives. If you are a hobby enterprise with a regular earning resource and you have invested a small amount on your hardware systems, you can earn approx. two dollars per day. You can reimburse your hardware cost in 1.5 to 2 years.
But if we talk about making it a regular income, Crypto mining is not advisable. It is not good to stay dependent on crypto mining profit solely. Investing $3500-$5500 in the hardware you would be able to let you earn $50-$55 per day. Hence, it is a costly affair for sure.
On the other side, the prices of digital coins will see a fast hike in future. Early-adopters will definitely make highest profits through it. The current worth of 1BTC is around $14,000, there is no wonder if it reaches $1 Million per 1BTC in next ten years.
Pool Mining Vs. Solo Mining
As cryptocurrency is becoming more popular day by day, large numbers of people are participating in and level of difficulty is high now. So pool mining is best solutions for miners.
In pool mining, all the participating miners pay to a common server every time, which solve the block. The amount you’ll receive depends on individual work to find that block. After mining, cryptocurrency stores in the wallet of individual miners.
List of Most Popular Cryptocurrencies to invest in
The digital currencies, which are most preferred for mining purposes at present, are:
Earlier in 2009, it was good to mine Bitcoins. Due to increased popularity & heightened level of difficulty, now it is only good for large-scale organized miners. Cost included in preparing your system for mining is still high, while you earn benefit very slowly at beginner level.
- Script based cryptocurrencies
Litecoins, Dogecoins, and Feathercoins are a few to name here. These are good to mine at beginner and small-scale level. Using a consumer level mining hardware, you can earn 55 cents to 10 dollars on daily basis by litecoins. Other two currencies are also suitable for beginners with a slightly less profit with the same mining hardware set-up.
It is good for small-scale mining as it is highly growing nowadays.
We’ve tried covering everything you may need for mining. Still left with curiosities, questions, suggestions, problems, and confusions then drop your comments below. We would love to revert them all.