The term mining is traditionally associated with physical commodities, like iron or gold, so when someone talks about mining a cryptocurrency, which is a virtual currency, it often adds to the confusion. Even mining a currency sounds strange, let alone cryptocurrency. So what is cryptocurrency mining, how you do it, the tools you need, and if it is still profitable in 2019? Let’s find all these answers in this article.
What is Cryptocurrency Mining?
Before learning about cryptocurrency mining, you must first understand the technology that is used to develop cryptocurrency – blockchain. So what is blockchain?
It is a digital ledger. The role of this digital ledger is to keep a record of all transactions made related to a particular cryptocurrency like bitcoin or Ethereum. As blockchain is a decentralized system, it sends the copy of the transactions to all computers attached to its network, called nodes.
All nodes then communicate with each other to make sure that the copy they have is the same. If this is not the case, the transaction is rejected. This is why Blockchain network and transactions are considered more secure and transparent compared to a traditional centralized network.
How Does Cryptocurrency Mining Work?
So what this has to do with cryptocurrency mining? Well, this is where miners play a role. Whenever a new block (a set of transactions) is added to the chain (hence the word blockchain), the block also needs a validation. This process includes answering a complicated math problem. The miners actually solve this math problem, using computers or machines, called mining rigs.
Even though they work like validators, but the people who use dedicated hardware and software for this purpose are called miners, and the process is called cryptocurrency mining. The first person or miner who solves the problem gets the reward in terms of a share of cryptocurrency. For example, if you are a Bitcoin miner, you can earn 12.5 tokens for validating 1 MB worth of Bitcoin transactions.
Proof-of-Work – What is it?
Mining is a part of the validation processes used by the blockchain and cryptocurrency. These methods are commonly known as proof-of-work or PoW.
Simply put, when a person as a miner put an effort to validate a blockchain transaction, he is rewarded in the form of a paycheck, which is cryptocurrency tokens. This makes miners the most important part of transparent and secure cryptocurrency transactions.
However, keep it in mind, the more miners at work, the tougher the competition, and the lesser the chance of solving the problem. This is why crypto mining is not as profitable as it was a couple of years ago.
To compete, you need more powerful computers, that consume a lot of electricity, that also increases the cost of crypto mining. Do you know miners today consume even more energy than total energy consumed by Argentina?
What Tools Do You Need to Mine Crypto?
With the growing popularity of cryptocurrency mining in the last few years, there is a growing competition in the industry as well. This means, with an increased number of miners, the mining as well as making a profit is getting difficult. This is where your mining rig, and other tools, mostly hardware becomes a critical part of the job.
Simply put, the more powerful your machine, or mining rig is, the more competitive you are. The software and hardware you use, also have an impact on your mining profits. For example, the higher the hash rate of your mining rig, the better the chances of beating the competition.
Here is a quick list of mining software and hardware you need to mine cryptocurrency.
Well, the hardware or machine you use to mine cryptocurrency is known as a mining rig. This is a machine specifically designed to mine crypto, and mostly runs 24 hours a day, 365 days a year.
As mining rig is a custom made machine for most miners, you are free to create a mining rig according to your own budget and power you need. Here are the key components that make a powerful mining rig.
Mining Rig Frame: The first thing you need is a mining rig frame or case, a frame that is designed to accommodate all the hardware you need for a mining rig, like motherboard, CPU, GPUs, and power source. See what a mining rig frame is review here
CPU/Processor: Even though the CPU or Processor is not as important as in the case of your personal computer or desktop, but it is still a mandatory part of a mining rig. CPU is mostly used as a source of power for a mining rig.
GPU/Graphics Card: The most important hardware for mining rig is the graphics card, or GPU (graphics processing units). The more powerful the GPU is, the more powerful your machine is. GPU also have a direct impact on your profits. This is why mining rigs contain several of the GPUs, with 6 or 7 GPU rigs commonly used in the industry. Some mining rigs even have 13 and even more GPUs.
You can choose from a large variety of GPUs available in the market, each offering a different set of benefits as well as limitations. Some are budget options but lack power, while others are more powerful but are expensive. Similarly, some GPUs work better for one cryptocurrency, while others work better for a different one.
Motherboard: As mining rig is also a machine like a computer, you need a motherboard to connect all the GPUs together. You can easily find 6 GPU motherboards in the market. However, if you want to build a mining rig with even more GPUs, like 13 GPU mining rig, you can add more to the motherboard using PCI risers, that can also keep your hardware cool and add life to your hardware.
So once you have the hardware, how do you begin with mining crypto? Well, to start with, you also need some software.
Coin Wallet: The first thing you need is a coin wallet, which is mostly a free password-protected online private database that stores all your earnings, that is cryptocurrency. This will also keep a record of all your ledger transactions.
Mining Software Package: To start with cryptocurrency mining, you also need a mining software. Here is one example of mining software from AMD. Some other popular software programs for mining include BFGminer and CGminer.
However, keep in mind, even though popular, but both of these are command line programs. If you want software with easy to understand UI, there are other options available like EasyMiner that can also work on your Android device other than Windows and Linux.
Mining Pool: A good way to increase your chances of earnings is to join a mining pool, that is a large pool of miners who connect their hardware to enhance profitability. You can join these mining pools for a fee.
These are the basic software you need. However, you also need a membership in online currency exchange (a few also allows you to use without a membership). This is where you can exchange your cryptocurrency for other cryptocurrencies or actual traditional money.
Can’t You Use Your Computer for Crypto Mining?
You can, but in that case, it will be difficult for you to use it for other tasks as most of the resources will be used for mining. This is why mining rigs are used. The computer is also not as powerful as a mining rig.
In fact, you can even use your gaming console or mobile device to mine crypto. However, can they help you generate any notable income? The blunt answer is, NO. This may help if you want to experiment with a lesser known new cryptocurrency where competition is not much.
Is Mining Crypto Profitable in 2019?
Well, to be honest, 2018 was not good news for crypto miners. The industry sees a quick surge in the number of miners for almost all major cryptocurrencies in the last few years that makes mining more and more competitive. On top of that, the prices declined for almost all major cryptocurrencies in 2018, that sucks the profit out for most miners. Especially for those dealing with high electricity cost.
However, things have started to get better in 2019. The prices are on the rise again in the last few months. Many miners also left after the price decline in the last few months, making the industry less competitive.
As the profitability of the cryptocurrencies changes very quickly, due to the price fluctuation and the level of difficulty, the key is to keep an eye on which cryptocurrency is profitable at this time. A good online source that can help you make an informed decision is WhattoMine.
So the simple answer to the question is, yes, mining crypto is still profitable in 2019, but only if you are mining the right cryptocurrency. You also need to calculate a lot of other factors as well, like hardware cost, electricity cost, hash rate, difficulty factor, block reward offered, and more.
To put it in simple words, crypto miners kind of provide bookkeeping services to the cryptocurrency network by validating transactions. They in return, get paid for their work, in the form of a fraction of the cryptocurrency. The key to making it profitable for you is by finding the right cryptocurrency to mine, buying and building the right hardware, and keeping the costs down like energy bills.