Mining of cryptocurrencies is one way in which people make money on the blockchain.
Crypto mining started in 2009 when Satoshi Nakamoto invented bitcoin.
People can mine cryptocurrencies using CPUs, GPUs or ASIC miners.
One alternative to Proof of Work (PoW) is Proof of Stake (PoS).
Crypto mining remains a lucrative way of earning money as a result of advancement in technology.
Cryptocurrency mining is one of the major means by which people earn money in the blockchain sector. In fact, cryptocurrency mining started in 2009 soon after Satoshi Nakamoto and his team invented bitcoin and has continued to our day.
What is cryptocurrency mining?
In simple terms, cryptocurrency mining is a process where people get cryptocurrency after completing some computing work. More specifically, it refers to a situation where people get rewards in form of cryptocurrencies after validating crypto transactions on the blockchain. This is because when people spend their cryptocurrencies, there are debit and credit entries on the digital ledger which permanently keep a record of all transactions.
However, recording of the transaction is not very easy because of people who manipulate the system. For example, some individuals aim to spend their cryptocurrencies more than once, capitalizing on the possible slow finalization of transactions. In order to prevent such challenges, miners verify all transactions, thereby securing the network. In most cases, this process uses the proof of work (PoW) protocol to validate all activities on a blockchain, thus protecting it from attackers. Put differently, mining is a means to ensure that the crypto transactions are accurate and reliable.
Validating transactions involves using machines which solve some difficult mathematical equations in the form of cryptographic hashes. A certain number of the equations correspond to a group of transactions called a block. It is after completing a block that miners receive their block rewards.
Procedurally, the first miner who cracks the code facilitates the recording of the transactions on the blockchain. As a result, he/she gets a reward in the form of the specific cryptocurrency related to that blockchain. For example, bitcoin miners validate transactions involving bitcoin and ultimately get their rewards in BTC.
Proof of work
Although proof of work is the most common method of mining cryptocurrencies, there are other alternatives, such as Proof of Stake (PoS), which is another consensus mechanism to validate cryptocurrency transactions. With this method, the miners should stake a certain quantity of the coin in order to have the privilege to validate some transactions and get rewards. The major advantage of PoS over PoW is its energy efficiency. As a fact, the Proof of stake method uses less electricity than proof of work. Thus, it is less expensive than the Proof of work.
Methods of mining cryptocurrencies
We have just discussed the broad methods of mining cryptocurrencies. Now, we want to focus on the specific ones. There are two broad types of mining cryptocurrencies, namely hardware and cloud mining. First, mining requires special computer software, designed to solve the cryptographic mathematic equations.
As an example, during the early days of cryptocurrency mining, people used CPUs. However, this method is too slow and can take very long periods to mine small fractions of a cryptocurrency such as bitcoin. Apart from the slow process, it uses much energy resulting in high cost, ending up being unprofitable.
Currently, people use specialized GPUs. With this method, miners use a set of GPUs, which creates high computational power, thereby increasing the capacity to mine the cryptocurrency. Nonetheless, there is a need for a reliable supply of electricity and internet service at all times. In addition, a cooling system for the rig is required since there is a high production of heat. It is also important that some miners form mining pools in order to increase their computational powers and mine much of a cryptocurrency within a short period. On the other hand, people can also mine cryptocurrencies using application-specific integrated circuit (ASIC) miners. Since the ASIC miners are specifically designed to mine cryptocurrencies, they have a higher output level than the specialised GPUs. More specifically, ASIC miners refer to some mining equipment which uses microprocessors for mining cryptocurrencies. However, they are specialised in the sense that each ASIC miner only mines one cryptocurrency. For example, bitcoin ASIC miners can only mine bitcoin, not any other cryptocurrencies like ether.
Because of the high cost of using ASIC or GPU for mining, people opt for cloud mining. Primarily, cloud mining makes it possible for people to mine cryptocurrencies without owning any equipment or having advanced knowledge of the mining process.
Therefore, it’s a cheaper alternative to mining as compared to the other two methods. Here, miners lease out the mining equipment belonging to some mining farms which have specialized data centres.
Advantages of cloud mining
Cloud mining has many advantages as compared to traditional mining. Here are the main advantages:
Individuals can easily buy cloud mining contracts and start earning immediately,
The users get the set mining output within the specified period of time. For instance, at Gate.io, there are mining contracts for 7 days only.
The miners do not need to acquire expensive equipment, neither do they need extensive knowledge about the mining process,
Once a user enters a mining contract, he/she gets a daily settlement for that.
Above all, cloud mining gives everyone a chance to mine cryptocurrencies. For example, anyone can cloud mine bitcoin at Gate.io after buying a mining contract for as low as $39, 69.
Why choose Gate.io for mining?
The cloud mining services which Gate.io provides are competitive within the crypto sector. Unlike in the traditional mining sector, you do not need to purchase a mining rig. As if that is not enough, one does not pay for rig maintenance or having a mining farm. The only requirement is to purchase a mining contract and thereafter reap the rewards immediately.
Considering that bitcoin is the number one cryptocurrency, many people buy Gate.io’s mining contracts and have 100% hashrate. More interestingly, you do not have to worry about the cost of electricity. Once you have paid for the mining contract, you will get the guaranteed amount by the end of the period.
Crypto mining is one of the ways in which investors can earn decent income. For most people, cloud mining is the best option. However, it is not a matter of investing in any platform , but selecting reliable ones such as Gate.io.
By Mashell. C, Gate.io Researcher
This article represents only the views of the researcher and does not constitute any investment suggestions. Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.