How do I make money from mining?
Mining is the most direct form of earning on cryptocurrencies. And while there are loudly voiced opinions that producing digital money is no longer profitable to falling exchange rates or increasing complexity, the reality proves the opposite. Plenty of people make a great profit making digital currencies.
What is crypto mining?
It is the process of producing units of cryptocurrency and supporting activity in the blockchain network.
How does crypto mining work?
Miners are computers performing the function of blockchain node - validate transactions broadcasted to the network, assemble them in batches and add new blocks to the chain. The node that has recorded the block receives a reward - coins issued to the chain as well as the fees.
Naturally, since all participants are equal, the competition is fierce. So how do miners work out who gets the prize?
In order to add a block, it is not enough to just validate transactions, it is also necessary to solve a cryptographic problem - typically, creating a hash of the new block matching specific randomized criteria.
What are miners?
This term have multiple meanings:
- A person who owns a computer, performing the functions of a node
- A computer supporting the blockchain
- An application-specific integrated circuit (ASIC) specifically designed to produce digital currency
The need for ASICs and other specialized hardware is caused by the high complexity of calculations involved in solving cryptographic problems in most popular networks. Ordinary PCs usually are not able to cope with the load and be productive.
In addition, a lot of algorithms favor specific hardware solutions (GPUs are typically more efficient than CPUs is just one instance of this) thus it is more efficient to design a tailor-made crypto machine than rely on brute force and simply increase the computing power,
How to become a cryptocurrency miner
There is no need to file applications and receive permits: just a few steps sre required:
- Determine, which asset you will mine. Currencies differ in multiple parameters. such as profitability, exchange rate volatility, and liquidity. Also, in some blockchains (using the Proof-of-Stake consensus algorithm) the node’s success is determined not by the computing power at their disposal, but by the number of respective coins already in their wallet.
- Purchase the equipment. Some currencies can be mined via any modern PC, some require a rig of multiple graphic cards working together, and some require an ASIC to remain competitive.
- Pick and join a pool. Pools are common in most networks - participants combine their computing resources and distribute the received rewards proportionally to the contribution of every participant. Naturally, the pool itself also takes a cut, but it is still more profitable to join than to mine on your own.
- Set up and configure your hardware.
- Make sure your equipment works constantly and has an internet connection at all times.
- Receive your coins.
Naturally, there are other ways to enter the industry such as hosting equipment on third-party sites or cloud mining.
How to make money mining crypto
Well, the basic concept is simple - you set equipment up and join mining pool. And that’s exactly what most people do.
However, once you get some coins, you have plenty of opportunities to increase your profits even further. You can use mined assets for trading, p2p lending, investments, and so on.
In other words, the opportunities are virtually endless.