Cryptocurrency mining is one of the many ways by which you can earn cryptos. It refers to the process of validating transactions between parties. Mining is done by specialized mining equipment and anyone can be a miner. Miners are dedicated individuals who use specialized computers for solving complex cryptographic puzzles to add new data blocks to a blockchain. But, the truth is mining is not meant for everyone. For mining cryptos, you must invest in a specialized mining rig and have access to cheap electricity.
How Is Crypto Mining Done?
Miners must use specialized equipment to solve mathematics equations to solve a block. When many miners contribute their hash power to a mining pool, the chances of earning better payouts is higher. But it also means that you will require more powerful machines and a huge amount of electricity. Cryptocurrency mining can be done in different ways:
- Cloud mining: This is by far one of the most popular ways of engaging in crypto mining where you do not have to invest heavily in establishing and maintaining a mining rig on your own. You can pay a third party cloud mining service provider to lease their mining machines. The lease/rent will last for a pre-determined period during which a share of the earnings made by that rig will be provided to you commensurate with what you have paid. Cloud mining service providers will typically own huge mining farms that comprise of hundreds of mining rigs. You can choose to sign up with a provider for free or buy a paid package. Paid cloud mining assures better returns while free cloud mining may have limitations like slow speed.
- CPU mining: Those interested in crypto mining can use CPU processors for the task. This was traditionally a viable option but daily miners have now opted for other mining methods; the reason being CPU mining is rather slow and may generate very low revenues. If you consider the high costs of power and cooling, this method is not very profitable. The only upside is that you can use ordinary computers to do it.
- GPU mining: This is a more popular crypto mining method that uses GPU rigs. It is both cheaper and more efficient, although costs of setting up the rig may be steep. The rigs will use graphic cards for mining cryptos. The upfront costs may be high but the payoffs are much higher and faster, compared to CPU mining.
- ASIC mining: The ASIC or Application Specific Integrated Circuits refer to special devices meant for performing single tasks like crypto mining. They can generate more cryptos than any other medium. The only downside is that the machines are so powerful that they deprive others using CPU and GPU rigs of profits because they have unmatched hash power. So, ASIC mining is not an option for beginners unless you are residing in a nation like China that gives you access to incredibly cheap electricity sources.
As a newcomer in the crypto mining world you can explore all these options and analyze their advantages and drawbacks. The industry is still in a nascent stage and there is enough room for growth. Whether you should take up mining or not depends on your risk tolerance.