Cryptocurrencies mining: how it works (for beginners)
In the beginning, mining is the process through which useful materials (or minerals)
are extracted from the earth (industry farms). Today, in the cryptocurrency industry,
mining is the process by which new coins are generated from a cryptocurrency
transactions system. How does this work?
Mining process: the case of bitcoin
Each mining activity uses a certain algorithm. For bitcoin, the mining uses SHA-256 to
achieve transactions. During transactions, heavy computational work ensures
transfers and their validation. What is really going on? In two words, the system
generates a string of 64 characters called a hash for a block of transactions that has to
be verified by miners (who have to generate identically the hash through the network
with their computers). The first miner whose computer does this gets attached to the
block and gets the reward. Miners are paid via that mechanism called PoW (Proof of
Work). Other miners in the network check if the block is correct and the mining goes
ahead. Through that mechanism, transactions that are occurring, are validated and a
bit of coin (new blocks) are generated from the network. This is a great difference from
the traditional currency transactions during which no money is generated, but fees
are paid. Mining appears then like a digital service an individual (the miner) offers to
the transactions network through his computer’s graphics card (GPU), Central
processing unit (CPU), or ASIC mining rigs and at the end gets a reward.
The total amount of bitcoins that the bitcoin network dedicated for mining is estimated at
21 million. These days a new way of earning coins is staking. For this, proof of
staking (PoS) is needed to get paid. This activity will probably replace mining activity
when it will not be possible to mine.
Mining types and tools
Mining is achieved with various tools (hardware + software): ASICs mining (ASIC
stands for Application-Specific Integrated Circuit); graphics processing unit (GPU) or
Central processing unit (CPU) of computers and scarcely of mobile phones. Therefore,
there are two main manners of mining: Direct and Indirect mining processes. The first
one is realized with hardwares+softwares connected to a mining pool. The miner uses
his own equipment to participate in the mining activity and get rewards from the
mining pool. He installs software that is provided by the mining pool and connects to
it via a URL. This kind includes many types (ASICs mining, GPU or CPU mining,
Farms mining). With the second kind, the miner invests in the mining activity of a
mining pool or platform that grants to him a certain amount of hash rates and/or
dedicates for him certain mining equipment (Cloud mining, 4th type). The miner’s
profits depend on the amount he invested in the mining activities. In this case no need
to buy equipment. What are the mining industry infrastructures?
When you mine a coin, you become a miner, but it is important to note that all
cryptocurrencies are not mine-able. There are different infrastructures in the mining
industry. First the Mining farms: They are Giga-data centers that are involved in
mining cryptocurrencies as big industries. For example, the best farms for bitcoin
mining are Dalian (China); Genesis mining farm (Iceland); Moscow (Russia); Linthal
(Switzerland); Bitfury (Netherlands ), Gigawatts (USA).
They are great data centers that mine one or various coins. They provide mining software for
individuals who after installing them on their computers and scarcely on phones,
connect them to the Mining pool via a URL as said previously, and hence participate in
the mining activities. According to the power and efficiency of their equipment, they get a reward.
As said previously, if you have a powerful ASIC mining
rig or a good desktop or laptop with powerful GPUs or CPUs, you may mine cryptocurrencies
as an individual at home. Just install the equipment and connect it to a mining pool.
Nowadays, it is possible to mine coins through websites or apps. ECOS cloud mining is a good example.
Besides this, there are some browsers that use your PC or phone to mine coins and pay you a
reward. Example: CryptoTab browser. You may earn coins through the Net browser and
Brave browser too. Unfortunately, a lot of fake websites/apps are increasing on the internet
so everyone must stay clever and keep their eyes open.
In conclusion, to be profitable, mining requires expensive tools today because they are
more efficient. Before joining that activity, you have to consider those criteria to avoid
high energy bills because efficient tools are high-energy consumers. Therefore, instead
of buying expensive equipment yourself, you may simply buy a low price contract on
a platform like ECOS cloud mining platform that provides for users adequate hash rates
for mining and tools to create their online small mining farm.