Just follow the name and it will be clear that mining of cryptocurrency can be termed as Crypto Mining. Right? Apparently, right. However, there is so much to add into it, given its significance and use cases all over the crypto space. Crypto mining has seen massive growth lately, following the wide acceptance and popularity of cryptocurrencies themselves.
What Is Crypto Mining in Simple terms?
Crypto mining is a process to update, verify and proof the transactions, made over the network, on a digital ledger—blockchain in terms of crypto. In the process of verifying the transaction, the participating node solves complex mathematical problems and in return receives fixed rewards. This transaction fees and newly minted coins, is the result of efforts that validators put to carry on the transaction.
In a nutshell, in crypto mining, the validator of a transaction needs to win the competitive solving of some equation, with the help of a computer with very high computing abilities. Validator node needs to submit the result and proof of his work ahead of every other participant, to ensure his win and claim the reward.
Why is Crypto Mining Significant?
When it comes to maintaining and keeping several thumb rules of the crypto space—decentralization, security, no intermediary, etc—Crypto Mining ensures them. No single person is authorized to carry forward the transaction and possess a proper rewards regime for validators’ profitability.
For a crypto miner or validator, crypto mining becomes a direct way to earn a fixed amount of reward. This can be generated via two distinct forms—one is newly minted cryptocurrencies and second is transaction fees.
What Happens in Crypto mining?
As mentioned earlier, crypto mining primarily includes verification and validation of transactions on the blockchain network. A miner, which is the node within the network, picks up the transactions from Mempool (memory pool). After picking up the transaction to validate, the crypto miner solves the hash of the transaction.
Once done with solving the hash, using the computing power of the crypto mining equipment, the transaction is considered to be done. Then the validator works towards organizing the transaction into the block and it indicates that the transaction is done. Hence the crypto mining process gets completed with the validator or the node receiving the reward.
How to Mine Cryptocurrencies?
Mining cryptocurrencies would require only several basic steps to follow. Although, some of them are way complicated and could be hard for you, yet some are pieces of cake.
- Invest in Good Mining Hardware and Equipment: Mining of any cryptocurrency could only be done using mining hardware. It becomes crucial for someone who is interested and looking forward to mine cryptocurrencies, to invest in some high-end crypto miner.
- If Solo Mining is not Viable, Join Mining Pool: Given the intense difficulty in mining cryptocurrencies, that needs massive amounts of computing power, it makes sense to join a mining pool and contribute in a combined computing power.
- Collect Your Crypto Reward: Now when you are done with investment and setting up part of your miners, only one step left from earning crypto reward mining. This is to open an exchange account to collect the rewarded crypto asset.
How Many Ways Types of Cryptocurrency Mining are There?
This can be divided into two different ways, as for describing two different aspects of crypto mining. One is dependent upon the basis of hardware and software used in crypto mining and the other is based on the method.
Types of Crypto Mining (Hardware and Software):
- ASIC Mining
- FPGA Mining
- GPU Mining
- CPU Mining
Asic Mining: The most prominent mining hardware, an Application-Specific integrated Circuit or ASIC is a miner that specifically indulges in crypto mining. However, it is one of the expensive mining hardware machines out there yet it is counted as the most efficient and effective miner, as it has a high hash rate.
FPGA Mining: Another effective way of crypto mining is using FPGA miners, although they are not as popular as the previous one. Despite having notable hash rate and efficiency, it does not have widespread adoption due to its least compatibility and hard to configure.
GPU Mining: When it became clear with time that mining was becoming difficult due to ‘difficulty’, GPU came into the play. Generally graphic cards were used for enhancing the gaming experience while increasing graphics interface, but later they also started getting popular for their crypto mining capabilities.
CPU Mining: Initially, crypto mining started with CPU mining as there was less competition as well as lower difficulty. So a cryptocurrency could be easily mined with a general processing unit. Even today, top crypto currencies like Bitcoin and Etheruem might not be possible to mine through CPU, yet several crypto assets that need least computing power can be mined by CPU mining.
Types of Crypto Mining (different ways):
- Mining Pools
- Cloud Mining
- Web Mining
- Solo Mining
Mining Pools: Given the mining today becoming less profitable and hard to generate any profit, mining pools come handy for someone interested in crypto mining. Group of crypto miners come together and mine cryptocurrencies using their combined computational powers. Further, the generated profit also gets distributed among them according to their generated power.
Cloud Mining: Considering that solo mining is becoming hard and unbearable, people also started looking towards cloud mining. Cloud Mining services provided by respective companies offer enthusiastic crypto miners mining capabilities in exchange for a fixed amount for a limited time.
Web Mining: Mostly infamous due to its methods, web mining takes the form of mining through using the CPU’s computing power of user browsing through their websites. This becomes risky sometimes due to mining without permission of the user.
Solo Mining: Most primary step towards crypto mining is Solo mining where any enthusiastic crypto miner can start on its own. However, given the increasing mining difficulty, it becomes almost impractical. Still cryptocurrencies with least difficulty can be mined using CPU mining.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2022/07/21/what-is-crypto-mining/