Cryptocurrency mining is a process in which bitcoins and other cryptocurrencies are born. Decentralized networks of people working alone or in large groups are engaged in the mining. A separate miner is known as a node. There are two main tasks of mining: to create more currency and confirm the authenticity of transactions conducted with coins that are already in circulation.
In Bitcoin for example – transactions made with Bitcoin are grouped into so-called blocks, which are periodically approved by the miners. The miners have financial motivation for this. They do their job, solving complex mathematical calculations with the help of their computers. Confirmation of the block gives them a certain number of new bitcoins in addition to earnings on the commission from the transactions.
Can anyone mine cryptocurrencies?
From a technical point of view, yes, but with Bitcoin and the increased complexity of calculations, you will spend more on electricity than you earn money. Roughly speaking, you will work at a loss. For this reason, many miners now create huge groups called pools to combine the power of their computers, called hashing power. According to Bitcoin’s algorithms, a huge number of computers working together have a better chance of performing calculations faster and earn money while reducing costs. Mining pools have become so large that any regular user can join them for free.
Is it possible to mine other cryptocurrencies privately?
Yes, some newer cryptocurrencies and those that have an algorithm different from Bitcoin can still be successfully mined with a conventional computer. The earnings, however, will be small and may disappear altogether due to changes in cryptocurrency. Remember: newly created cryptocurrencies are incredibly prone to extreme volatility. Even if you manage to make a good profit today, tomorrow you can already go to a loss.
The hardware required for mining, of course, depends on what you are going to mine. If you just want to try, then the normal PC will also come down. The same is true for new altcoins, depending on their algorithms. However, as for Bitcoin, as we have already said, it is better to leave this matter to the attention of professionals.
If you want to make good money, you can buy mining equipment. This equipment costs a lot of money, so you should calculate the planned costs to make sure that the deal will pay off. Also consider also such important factors as electricity consumption.
You can also rent equipment owned by the company. This is called cloud mining and much easier than buying the equipment yourself. However, in the long run your earnings will be lower.
We already said that earlier people could mine independently, but now in order to have profit from this, groups of people are required. Similarly, in the future all bitcoins will be mined. This means that only the interested miners will process the transaction blocks, thereby establishing a commission for money transfers. Commissions will be higher and transfers whose users offer the highest commission will be processed faster. The end of mining also means that bitcoin will finally become a deflationary currency.