A number of interested individuals often ask to understand the concept of cryptocurrency mining. When the word mining is mentioned what really comes to the mind is digging into the earth to take out deposited precious metals. A lot of people are still engaged in this tedious work of having to dig deep to excavate the scarce metals.
Even though the process is still the same for cryptocurrencies, the only way we can get cryptocurrencies is by mining. Cryptocurrency is mined as any different precious metal that is mined from the earth and injected into the market. Cryptocurrency such as Bitcoin can be mined and then exchanged with others according to their market value at the time.
Mining in cryptocurrency is a validation of transactions. Every service rendered deserves a reward; therefore, the reward received following the validation of these transactions is cryptocurrency. The reward reduces the transaction fees by providing incentives to add to the processing power of the network. Hashes are used in the validation of these transactions.
However, as more people get involved with virtual currency, hashes generation of transactions have become increasingly difficult. With this, miners must invest a lot of resources to provide the energy needed to operate the high performing computing machines.
It is a point to note that the reward decreases over the years. Therefore the value of cryptocurrency gotten from mining do not meet the resources spent in mining processes; in that case, the miners pool resources together to reduce their cost and as well share in the reward.
You might often wonder where this resources or amount of money spent to go to. The answer is simple: these resources go into cooling large computers set up, electricity generation and maintenance of these stations.
How does Mining Pool Work?
Mining pools involve individual working together to generate cash that will eventually meet the specific criteria. In all instances, this must meet certain criteria before adopted into the blockchain. All the miners are searching for solutions that meet this difficult hash criterion in order to keep their mines running. Hashing power for Bitcoins has grown exponentially over the years since its creation in 2009. As a result, the difficulty has increased, and the hardware used has to be made more powerful and sophisticated thus adding to its cost.
With Litecoin, the story is slightly different as its script algorithm is rather RAM intensive thus having to communicate between the CPU process and memory to achieve the expected hash. The hitch is in the ease of data flow between input and output and having the needed RAM.
This difficulty can sway one in various locations. For example, when Bitcoin was introduced newly, you could just use your PC to solve the equation, but now miners have to pool resources to purchase powerful machines to attempt the equation.
What can I gain from Cryptocurrency Mining?
There are ways you can profit from Cryptocurrency mining. The gains are determined by the quality of investment. This is based on the mining power of your hardware. Hardware power is measured in Trillion Hashes per Second (THS).
There are factors to consider when mining cryptocurrency for profits. They are initial hardware cost, hardware power in THS, the power consumption of hardware and electricity cost.
All these factors must be critically examined before profit mining is initiated.
However, there is the risk of hardware breakdown which can leave a miner traumatized and installation of large-scale power supply equipment.
Equally, care must be taken to secure your mined currency to avoid theft due to hacking and other means.
This is a great quick informative education video about the basics of Bitcoin and Cryptocurrency mining :