The prospect of mining cryptocurrency can be daunting, but it doesn’t have to be. The three biggest methods of mining are as follows: software mining, hardware mining, and cloud-based mining. In general, most mining is done through speculation, because you need to calculate your profitability when mining cryptocurrency.
As with any investment, there is always risk. One minute the value of your desired cryptocurrency could be high, but the next minute it could plummet. Miners typically have a rough idea of whether they believe a cryptocurrency will increase in value, and it is these cryptos they will opt to mine.
- Look to mine the most profitable token.
- Look to mine coins that start with a low hash rate and acquire a lot of them – then hope they are added to an exchange.
- Mine the most profitable coin, sell it, and then buy other coins (that may or may not be mineable) that you believe to be the best investment. This is a form of speculative mining.
- Remember to use a mining profitability calculator to determine whether or not you will turn a profit on your desired token. Also, ensure that you calculate your electricity costs, since mining uses a tonne of electricity.
Hardware mining is incredibly popular, though its initial start-up cost will set you back a lot of money. When looking into mining hardware, it’s important to take note of your chosen hardware’s hash rate and power consumption. Below is a brief list of possible hardware options:
- Halong Mining DragonMint T1: The T1 has an impressive 16 TH per second hash rate, making it one of the most efficient pieces of hardware on the market. However, it does have a consumption of 1,480 Watts, so you will end up using a lot of power.
- Pangolin Whatsminer M3X: The M3X is an intensive piece of hardware that uses a ginormous amount of power, ranging between 1800-2100 Watts. This does come with a 12.5 TH per second hash rate, which is good, if still lower than the T1. However, the M3X does cost a lot less than the T1.
- Bitmain Antminer S9i: The S9i utilises a Dual ARM Cortex-A9 microprocessor with support for Gigabit Ethernet. This powerful processor enables the hardware to mine blocks that are submitted instantly. The S9i has a hash rate of 14 TH per second, as well as boasting a lower consumption rate than both the T1 and M3X, clocking in at roughly 1,320 Watts.
Whilst these three pieces of hardware are amongst the most popular on the market, they are by no means the only ones available. For instance, the Avalon6 is another cheap option, but it is unlikely to turn you a profit. Make sure to do research into your desired hardware to ensure you make the correct purchase for your needs.
Hardware mining terms
- Hash rate: The hash rate refers to the amount of power a miner uses to solve a mathematical algorithm that mines the cryptocurrency.
- Power consumption: The power consumption informs the user how much electricity the mining hardware will use when operating. Power consumption is measured in Watts. To avoid using up huge amounts of power, you’ll want to find hardware that uses a low number of Watts.
- Energy efficiency: Energy efficiency is measured in Joules. Similar to power consumption, the lower the amount of energy a miner uses, the better. For instance, if the number of Joules is low, it tends to suggest that the miner will consume less power and still put out the same amount of work.
In simple terms, cloud-based mining refers to mining using the shared power run from remote data centres. The only thing you need to start cloud-based mining is a home computer, a cryptocurrency wallet, and a few other basic essentials.
Pros of cloud-based mining
- You can do it at home without the need for an air-conditioned space to run a mining setup.
- No added electricity costs.
- You don’t need to offload equipment if mining ever stops being profitable.
- No risk of being let down by your mining equipment, which can cost a lot of money.
Cons of cloud-based mining
- High risk of fraud.
- Lower profits since it will be split with the operator.
- Lack of control and flexibility.
Types of cloud-based mining
- Hosted mining: This type of cloud-mining is when you are leased a mining machine that is hosted by the provider.
- Virtual hosted mining: This type creates a general purpose, virtual private server. You need to install mining software for this method.
- Renting hash power: This is where you rent an amount of hashing power from a provider without having a dedicated physical or virtual computer. This method is quite popular.
- Genesis-mining: This is a popular company where users are able to buy hash rates for Bitcoin, Ethereum, and Monero mining.
- Hashflar.io: This is another popular site offering some of the better rates in the industry. You can mine based on hash algorithms such as SHA-256, Scrypt, Ethash, and X-11.
- Hashing24: This site offers a free demo, so users are able to test the waters if they are unsure about which contract to pick.
- NiceHash: This site offers cloud-mining, hash rental services, and multipool. They offer hashing power without contracts on a pay-as-you-go basis.
Note: It is worth knowing which hash algorithms belong to which cryptocurrency. For example, Bitcoin works with SHA-256, Ethereum with Ethminer/Minergate, and Litecoin with Scrypt. Make sure to do your research before jumping to a decision.
Choosing the correct software is also a vital aspect in this space. The way cryptocurrencies are mined is based upon proof-of-work algorithms. These algorithms enable miners to process data and assort them into blocks. However, the more people that mine on a network in turn increases the difficulty for the miners.
Ethereum works on its own proof-of-work algorithm, which is dubbed Ethash. Furthermore, it has its own protocol known as ‘GHOST.’ This enables Ethereum to have quick-fire transactions and to fuel its network with ‘Gas.’
Litecoin, though, uses Scrypt. This, in essence, is not too dissimilar from Bitcoin in its code. But, it allows for transactions to be approved every 2 1/2 minutes, whereas Bitcoin typically allows for them to be approved every 10 minutes.
The important thing to note about software is that because cryptocurrencies run with different algorithms, they require different software. For Bitcoin, it is recommended to use the official BitCore client, whereas Ethereum would require something like Ethminer or Minergate.
As always, make sure to do adequate research before getting started.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.