What is cryptomining?
Cryptocurrency mining is a process aimed at extracting new types of coins and verifying the legitimacy of transactions performed in the blockchain.
Cryptomining cryptocurrencies are used for bitcoins and other . These are large, decentralized networks of computers around the world, run by miners who verify and protect the virtual ledgers that document cryptocurrency transactions. In exchange for their processing power, cryptocurrency miners receive rewards in the form of new coins.
There are different ways to get cryptocurrency . It can be through an exchange, getting them as part of payment for some product or service, or mining them virtually.
What do I need for cryptomining?
Some time ago, anyone with a computer could become a cryptominer . But as the blockchain grew, so did the processing power. ( Bitcoin mining consumes about 94 terawatt hours of electricity each year in the United States. It takes an average home 9 years of electricity to mine just one bitcoin). This is why large specialized companies or mining pools with large resources are now . the process of mining cryptocurrencies
Mining farms or mining pools are spaces built in regions with access to cheaper electricity, created by groups of miners looking to make large profits by pooling their CPU blocks.
To understand how crypto mining works, it is important to have two main elements involved in the process:
- A cryptocurrency wallet or virtual wallet: this is where the miner can store what he earns from his work.
- Mining software: miners must invest in powerful computing hardware, such as a graphics processing unit (GPU) or a specialized integrated circuit (ASIC). Some miners, especially Ethereum miners, buy individual graphics cards as a cheap way to improvise mining operations.
How does cryptocurrency mining work?
With clear concepts, we can understand how cryptomining works:
To successfully add a block, miners compete to solve extremely complex mathematical problems. And when I say “complicated,” it’s not because the math is complicated, but because you have to be the first miner to come up with the right answer ” hash” or the closest answer to the numerical problem. This process is also known as proof of work (PoW) .
To begin mining is to begin participating in this proof-of-work process to find the answer to the puzzle. Miners go through trillions of hashes every second until they find one that satisfies a condition called “complexity. Both the complexity and the hash are very large numbers expressed in bits, so the condition simply requires that the hash be less than the complexity.
The complexity only increases as more miners join the network.
The miner who succeeds in solving the puzzle will update the blockchain registry with all the verified transactions, be able to add a block to the chain, and receive a predetermined reward.
How miners are rewarded
People who engage in cryptocurrency mining, do so in exchange for a reward, although it can actually be divided into two:
- They receive their own commissions for each transaction.
- They receive some of the cryptocurrencies that are issued.
Add that the rewards vary in each cryptocurrency, since it depends on the degree of acceptance in society of each coin, the more accepted and more liked it is, the greater the reward will be because there will also be a greater number of miners willing to dedicate themselves to it.
How much is earned by mining Bitcoins
In May 2020, the 630,000th block was reached and it was 6.25 bitcoins.
In 2024 the 840,000th block could be reached and it would be 3.125 bitcoins.
Who can be a Bitcoin miner
In principle, anyone who wants to can be a Bitcoin miner, or at least try, although it will require very powerful and advanced software and computers, not to mention a perfect command of both mathematics and computer science and a willingness to assume a high electrical cost.
For new transactions to be officially confirmed, they have to be added in a block with the proof of mathematical work. Solving mathematical problems is extremely complicated, as it is necessary to perform millions of calculations per second and must be solved before the blocks are accepted and rewarded.
In addition, competition also complicates the process, as the more people start mining Bitcoins the difficulty to find valid blocks increases substantially (the average time to find a block is always 10 minutes).
To perform cryptocurrency mining a number of elements are needed and all this entails a series of important expenses:
– Having at least one computer. It is important to know the hash rate, the unit of measurement of the processing power of cryptocurrencies. It indicates the number of operations that the computer can perform. If you do not know it, you can search the Internet for the computer model together with the words hash rate or mining.
Among suitable equipment would be:
- AntMiner S19
- AVALONMINER 1246
- WHATSMINER M30S++
– Have at least one ASIC mining equipment. ASICs overheat a lot, so they have to be cooled (ideally at 45 degrees).
– Price of electricity in the area. Something important because mining is 24 hours a day every day of the year, i.e. nothing can be turned off. The more powerful an ASIC is, the more electricity it consumes and the higher the cost of electricity will be, which can sometimes make mining unprofitable. This is why miners tend to look for areas with the lowest electricity prices.
– Maintenance and infrastructure costs.
– Cost of broadband Internet connection.
– The cooling required by the equipment and its corresponding energy.
Therefore, before a person decides to engage in mining, he/she must know that all the economic costs, which are very high, are borne by him/her and in exchange he/she receives Bitcoins as a reward, the motivation and presumed profitability being that the bitcoin price continues to rise.
On the Internet there are calculators that indicate the potential profitability of mining at any given time, they are not static data, because they vary, but at least they serve as a guide. These calculators request a series of data and will tell you whether or not it is worth the money invested. Among the most used ones it is worth mentioning:
Until when will Bitcoin mining be done?
This is a process that is temporary and will continue until the last bitcoin has been issued. The number of bitcoins being created each year is automatically halved until the Bitcoin issuance ends when 21 million bitcoins are reached.
But this will not be an obstacle, as bitcoins can even be divided into eight decimal places.
What is halving
Every x amount of time the amount of Bitcoins miners obtain is decreased. This process occurs every certain number of blocks, usually every 4 years.
Its main purpose is to maintain control during Bitcoin provisioning and avoid its inflation.
Why is Bitcoin mining criticized?
The mining of Bitcoins has received a lot of criticism because of the environmental issue as this process consumes a lot of energy.
For example, calculations estimate that in China, energy consumption from Bitcoin mining will generate more than 130 million metric tons of carbon emissions by 2024.
What types of mining exist?
In the process of mining digital currency we find two types:
PoW (Proof of Work), which in our language would be proof of work . This is the most widely used system for mining currencies such as bitcoin, etherium, lightcoin and monero . This type of mining requires powerful machines capable of solving a number of hash puzzles . Until these puzzles are solved, it will not be possible to offer a new block to add to the Blockchain. Nor will new digital coins be generated to reward miners.
PoS (Proof of Shake), which translates to Proof of Participation . This model is based on the purchasing power of the miner. That is, the more cryptocurrencies you have, the more you can mine. And it’s a motivational mining model. And it was created as an alternative to PoW, seeking to address the disadvantages it presented. There are now many cryptocurrencies that use the PoS system because it helps maintain its value in the market.
What is cloud mining?
It is a procedure by which anyone can start mining cryptocurrencies without having the necessary equipment . This is done through a remote and shared data center located in what we call the cloud . In this way, anyone who wants to try their hand in this field can do so without facing the high costs associated with the purchase of the necessary equipment as well as the costs of electricity, paying only for what corresponds to the service provided by the provider.