What is mining and how to make money on it
What is mining and how to make money on it? After all, every fifth person in society is attracted by Bitcoin, Litecoin or Ethereum. Earnings on cryptocurrencies touched people of several social strata: high school students, teenagers, office workers, serious businessmen.
The number of miners is increasing hundreds and even thousands of times every time, and beckoning every day is more and more difficult. But so far, some Internet users know about this new Internet earnings of the 21st century.
For 2021, it is no longer enough to use a standard mid-range PC. To make good money on cryptocurrency, users actively invest in mining and purchase special expensive equipment.
Therefore, we will analyze in detail what a new popular earning industry is, who is a miner, what are cryptocurrencies, the advantages and disadvantages of mining, what is cryptocurrency mining, and also how to start making money on cryptocurrency, what are the ways to earn money and how much they earn with the help of cryptocurrency.
What is mining
Translated from English, the word mining means “mining" (meaning precious metals, minerals and ore). In the crypto community, this word has the same meaning, because mining virtual currency also requires tools (equipment), resources (energy) and hard work (machines) to achieve a result.
Mining is a new trend in the modern digital and financial world. This is the only way to receive (not buy, but create) cryptocurrencies, which is based on solving mathematical problems with a special computer with one or more video cards. Without any heavy physical and intellectual tasks, you can earn good money by simply starting the computing process.
Mining began its existence in 2009. It was during this year that Satoshi Nakamoto earned his first BTC block. Therefore, this person is the creator of bitcoin. Miners believe that thanks to his discovery, Satoshi has millions in his wallet. But there is no evidence to support this hypothesis.
What is cryptocurrency mining
Cryptocurrency is an artificial digital type of currency that is equal to real money and has an official exchange rate. For the first time the name "cryptocurrency" was used in the famous Forbes magazine in 2011. The popularity of cryptocurrency began to develop gradually. In recent years, its demand has grown rapidly due to the following advantages:
- openness and ease of use;
- versatility and widespread use;
- high independence and anonymity of payment transactions;
- lack of a single center, which cancels the control and blocking of payment transactions;
- security of transactions using cryptographic encodings.
The listed characteristics of the currency attract users, and therefore its demand is increasing every day.
Popular types of cryptocurrencies
For 2018, the number of virtual currencies reached 1448 options. In accordance with the value of the dollar, the most popular types of cryptocurrencies are: bitcoin, tokens (De-Fi tokens inclusive) and altcoins (including stablecoins).
Bitcoin is a global peer-to-peer electronic payment system that was the very first of the cryptocurrencies. Altcoins or alternative cryptocurrencies appeared after the successful launch of Bitcoin. An alternative currency was introduced in 2011. Tokens are analogues of shares on stock exchanges. Tokens are units of accounting for assets in IT projects.
Cryptocurrencies are evaluated according to the following characteristics:
- ease of use;
- transaction speed;
- market value;
- dynamics of growth and decline;
- market capitalization.
Based on the above indicators, the miner evaluates the feasibility of buying and “mining” a particular currency.
What is bitcoin mining
Bitcoin mining is the earnings of the most popular and highly valuable cryptocurrency. This type of virtual currency appeared the very first back in 2009. Bitcoin is recognized by a large list of countries that use it as an independent equivalent payment system. Bitcoin has a number of advantageous characteristics that increase its popularity every day:
- maximum anonymity due to the complete absence of personal data;
- execution of completely transparent transactions;
- economic and political independence;
- limited amount of currency.
The value of this type of cryptocurrency is constantly increasing. Forecasts may change in a second, and the day of the last final bitcoin coin is closer and closer. But every miner is hoping for maximum earnings, despite uncontrolled falls and the rise in the cost of bitcoin on world exchanges.
Hashing is the principle of mining. Hashing is an algorithmic process of selecting and creating an input (bit) chain of cryptographic symbols (hashes) to solve virtual problems:
- money transfers;
- storing passwords and logins;
- file checks;
- development of an electronic signature;
- building unique identifiers;
- search for duplicates;
- building associative arrays, etc.
But to perform such hash functions, obtain hash codes and, accordingly, earn electronic digital currency, you will need special computing equipment. The equipment on which computing work will take place must have a power supply, a video card with a graphics processor and a motherboard with a central processor. Based on this, we can say that the implementation of the blockchain in practice and the successive transactions that a huge system of users performs are what create and exist digital currencies.
What is blockchain technology?
This technology is used to record and store dimensional arrays of information. Blockchain is a methodology for building and distributing databases that do not have a single center and consist of chains of transaction blocks. In turn, transactions contain information about transfers, wallet addresses, etc. Each transaction with new information has its own code or the so-called "hash key".
- resistance to hacker attacks;
- transparency of work;
- the inability to cancel a transaction and carry out transactions retroactively;
- cross-border nature of work.
But based on the described advantages, the disadvantages of this technique flow smoothly. That is, cryptographic tools complicate user identification, the nature of the work increases cyber fraud, and decentralization makes it impossible to track mining.
Who are miners and why are they needed?
Miners are users who generate hash codes using special equipment. Miners are a special link, the main tasks of which are:
- support for the decentralization of digital currencies;
- protection of the network from the introduction of incorrect data and system attacks;
- generation of blocks for the blockchain;
- confirmation of the correctness of transactions.
Thanks to the miners, new types of cryptocurrency are also created and, accordingly, they receive high rewards for this. Anyone who has equipment with sufficient capabilities and power can become a miner. If a miner wants to seriously earn large amounts of cryptocurrencies, then he connects not one PC to the process, but a number of devices at once. That is, the miner creates a "mining farm" in which powerful processors work.
Methods for obtaining cryptocurrencies
The initial step for those who want to start earning virtual money is to register a user on a special exchange. For full registration you will need
- the presence of an electronic wallet (if you do not have one, you can easily and quickly create it);
- personal account verification;
- storing credentials in a safe place.
The second step is the start of mining. There are three popular ways. The first option is mining on your own personal computer, which has a powerful video card. The second way is to join large-scale remote cloud servers that are suitable for performing hash functions. The third simple and not confusing method is to buy cryptocurrency for real non-virtual money.
But even less popular options for earning digital currencies. Every day there are a large number of ideas and ways to earn more and quickly cryptocurrencies. Therefore, miners need to follow the news of the cryptocurrency world, the exchange rate of digital currencies and their position on the exchanges.
What equipment is needed for mining?
The implementation of computing tasks can be reproduced using two devices:
- Video cards (GPU, graphics processing unit).
For the Ethereum network, some miners create independent budget video card rigs. Such installations can also achieve the desired hashrate.
- Specialized ASIC device.
ASIC (application-specific integrated) is a small compact installation whose only task is to earn cryptocurrencies. This device is considered the most advantageous in this area. Standard models are made in the form of a chip that cannot be flashed and has high performance. A high-quality ASIC should be equipped with chip-based processors, coolers and power supplies. When choosing an ASIC, the miner pays attention to the efficiency of the hashrate, the amount of electricity consumed and the payback period.
What is a pool and why is it needed?
At the initial stages of mining, it is difficult for beginners to get involved in the process. Beginner miners do not always have the right quality assurance. Therefore, those who are just joining a number of miners are recommended to join cloud pools. A mining pool is a server that combines miners and their devices. By joining their efforts, miners decrypt the hash code faster than a miner who works solo.
For miners who create pools, there are also advantages. Pool owners become real businessmen who earn money from the work of others. The organizers of the pool charge a commission from the coins earned by the miners of the pool. On average, the commission fluctuates in the range of 0.3-2%. Often, in addition to the official commission, pool owners fraudulently underestimate the amount of computing power spent by an ordinary miner. Therefore, the main disadvantage of mining pools is the possibility of manipulating the actions of miners by the organizer of the pool.
Mining farms: advantages and disadvantages
Farm mining is a combination of video cards and a powerful cooling system. The larger and better equipment, the more active cryptocurrency mining. Farms can be created either independently or purchased ready-made with the assembled frame and the necessary contents. The disadvantages of the company are the long-term payback, the scale and bulkiness of the structure (a one-room apartment is not the best option for a farm). Also, if you do not know the subtleties of installation, then it is possible to simply burn the microprocessor and video cards in a couple of seconds.
Of the positive aspects of farms for the extraction of cryptocurrency, there are:
- constant availability of video cards on sale;
- the possibility of reselling equipment to gamers;
- the presence of a warranty period for the operation of the video card;
The main advantages of farms are high productivity compared to single equipment and, accordingly, a progressive increase in income.
How to earn on mining and withdraw money?
We discussed above how the mining process takes place. Therefore, we know that in order to receive a mining reward, 2 conditions must be met: verification of a 1 MB transaction and solving a complex mathematical problem. And if the miner and his equipment are the first to find a solution, then the miner receives a well-deserved cryptocurrency.
Earned currency can be exchanged for real money. There are 3 ways to exchange cryptocurrency:
- through exchange systems ("exchangers");
- using a specialized terminal;
- through special exchanges.
The exchangers are very simple and easy to use. There are many options for exchangers. Each miner chooses a convenient option for him. To carry out an operation through exchange systems, you will need to indicate the amount of the amount to be withdrawn, the card number, email address and, sometimes, full name. The minus of exchangers is the limitation of the withdrawn amount of money. To withdraw through exchanges, you need to create your account, transfer cryptocurrency to fiat currency, and only then withdraw money from the selected exchange.
Factors affecting cryptocurrency earnings?
Cryptocurrency mining is influenced by 4 fundamental factors:
- power and number of video adapters (the better and more video cards, processors, the more income);
- the current rate of the crypt against the euro, dollar or ruble (that is, the ratio of income and minimum profit, taking into account payment for electricity);
- demand for a “digging” coin (the higher the rate of a coin, the more difficult it is to get it against the backdrop of great competition);
- the cost of electricity consumption (a high price for electricity will limit the capabilities of the miner and reduce his income).
Already after a couple of months, you can analyze whether this type of earnings is suitable for you or not, whether it is worth developing further and creating “farms” for mining cryptocurrencies.
How much can you earn from mining?
Since cryptocurrency mining is a multifactorial concept, it is difficult to specify a single-valued exact amount that can be earned. With one middle-class gaming computer and cheap electrics, miners more often "mine" currency on Zcash or Ethereum. Daily production using this option averages 1-2 dollars.
Farm earnings are clearly superior to a single option. But farms require a lot of energy, and therefore additional costs are needed. For example, with a stable Ethereum exchange rate, a farm consisting of 8 GPUs brings $15-20 daily. By subtracting the cost of electricity from the monthly income, you can get an income of up to 25-30 thousand 🪙.
Given the cost of 8 video cards, the miner will be able to start earning net profit in a year and a half. But the payback of each farm is individual and is directly proportional to the cost of the selected equipment.
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 by mining bitcoin 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, having studied at New York University, began to mine cryptocurrencies and, having appreciated the relevance of electronic currency, created a company offering ready-made bitcoin miners.
- Fitz Hall, who, thanks to the earned bitcoins, was able to earn the first million within one year. Now he is a successful businessman and investor who is not even 30 years old yet.
- Eliza Dadiani is one of the first girls who started mining crypto and opened an art gallery with the money she earned. A feature of this gallery is the ability to pay with bitcoins.
Knowing these stories, miners do not lose interest in cryptocurrency mining and continue their efforts.
Risks and cons of mining
Every business and activity has its risks and pitfalls, and mining is no exception. Problems and risks of working with cryptocurrency can be divided into the following groups.
- Decrease in profits associated with the peculiarities of the cryptocurrency market (drawdown of rates).
- Lack of internet (bad ISP, interruptions in network transmission, insufficient file transfer speed, etc.) or electricity (routine checks, wire breaks due to bad weather conditions).
- Release of new powerful and improved ASICs.
- Theft of cryptocurrencies as a result of the lack of proper protection of digital assets.
- Loss of earnings as a result of technical breakdowns of equipment
Breakdowns of video cards, processors and other equipment can definitely happen, despite the guaranteed factory operating time. Breakdowns most often occur as a result of improper overclocking of equipment, as well as a poorly organized or insufficiently powerful cooling system.
The Future of Cryptocurrencies in Relation to the Global Market
The prospect of the practical application of cryptocurrency in the World Market depends on the decision of the people who control the policy of the countries, their view and vision of such a currency. Japan is the country that has officially recognized bitcoin. The authorities of the Republic of Belarus relatively recently legally approved the possibility of receiving, selling and buying cryptocurrency by individuals. But at the same time, the Chinese authorities have completely limited the ownership of virtual coins.
they want to offer many users an analog version of the popular cryptocurrency, which will be controlled by the state authorities. This idea remained under consideration for a long time and did not have a solid legislative base, without which it was impossible to start the development and operation of an analogue. The legislative draft “On the Development of the Digital Economy” was recently adopted. EU countries are also actively discussing this topic. The introduction of bitcoin as an official currency is an EU proposal that continues to be under consideration.
Given the position of the cryptocurrency, it is impossible to speak unambiguously about a favorable forecast, because mining is an uncontrolled independent process and it is impossible to predict success. The decision to start mining is controversial, because there are positive and negative aspects of this process. But while bitcoin is growing, miners continue to mine it and other cryptocurrencies, and withdraw what they earn to their wallets.