What is Cryptocurrency mining?
Cryptocurrency mining is the process by which payments are verified and added to a digital ledger known as the blockchain. When one blockchain is verified, a new Bitcoin is released. Bitcoin and Ethereum miners use powerful mining machines to solve complex math problems that help arrange new transactions into blocks. The miner who solves the correct algorithm places the next block and earns a miner’s fee that is usually paid by traders.
Why is Bitcoin Mining Necessary?
- It’s through mining that cryptocurrency transactions are verified as legitimate and transferred to the recipients.
- Mining helps introduce new cryptocurrencies into the market.
- Security – mining is designed to be difficult and decentralized to ensure that no one attempts to mine old blocks and no one attempts to send the same payment twice.
- Mining helps prevent identity theft among traders.
What’s the Reward for mining?
When miners complete a block, they are eligible for a ‘block reward.’ The block reward for Bitcoins in 2018 is 12.5 Bitcoins and part of the transaction fees people pay when making transactions. The current block reward will be halved in 2020, meaning miners will be getting just 6.75 Bitcoins henceforth. The block reward for Ethereum is three ether coins and the transaction fees for the block (gas). Ethereum miners are also given the option to mine an alternative block that was not submitted to the network (uncle blocks).
How is mining done?
- The difficulty of mining a cryptocurrency is an important indicator of whether it’s worth the time and investment needed.
- Bitcoin uses a system known as proof of work to prevent tampering of the blockchain and to help miners validate new transactions.
- The proof of work concept consists of long strings of numbers known as hash functions.
- Both Bitcoin and Ethereum set difficult level for validating a transaction.
- Mining is a competitive process, and one lucky miner generates an acceptable proof of work every ten minutes.
- Miners work together in pools to increase the chances of completing a block.
- Once a block is added to the blockchain, it can’t be altered.
- Both Bitcoin and Ethereum use the proof of work system
The Tools used to mine Bitcoin and Ethereum
When Bitcoin was first launched in 2009, mining was fast and easy. It was possible to mine Bitcoins using a normal computer CPU. Back then, the block reward for mining Bitcoins was 50 BTC. Over time, Bitcoin toughened the mining algorithm to make it near impossible to mine using CPUs. Miners switched to GPUs, but then they were later overtaken by ASIC machines
What is an ASIC Mining rig?
Also known as Application-Specific Integrated Circuit (ASIC) machines, these mining rigs are best suited to solve the complex algorithms needed to validate a block of Bitcoin or Ethereum transactions. There are ASIC machines customized to mine either Bitcoin or Ethereum. But in general, these machines must fulfil the following criteria to warranty better return on investment:
- Hashes per second- the higher the hash rate, the faster the machine can solve the algorithms needed to validate a block. However, the hash rate also affects the machine’s speed.
- Price- ASIC machines cost between several hundreds of dollars to $3000. The more expensive machines are faster and more efficient.
- Efficiency-consider factors like power efficiency, the price and durability to ensure you will make profits at the end of it all.
ASICs are Expensive-How else can you mine Bitcoin or Ethereum?
For most miners, ASIC machines are the best bet for making money. However, there is an alternative option known as cloud mining. The process involves using a cloud-based data center that provides you with the computing power needed to mine either Bitcoin or Ethereum. Miners pay a fee for this service, which means that the end returns on investment can be much lower when you add power consumed when mining.
Mining Ethereum with GPUs
It is possible to mine Ethereum using GPU and make money off if it as expounded on https://www.abitgreedy.com/mining-Ethereum/. However, like buying an ASIC machine, mining Ethereum is an investment that requires almost the equivalent of purchasing an ASIC machine. Here is why:
- You need at least four graphics cards to build an efficient rig.
- Have adequate power supply and a power supply unit.
- A Motherboard with a CPU. The CPU should hold at least 3GB worth of RAM.
- Hard Drive to hold data as you mine.
- Riser cables to connect the GPU cards to the motherboard.
- A mining case to protect the expensive parts.
- AN Operating System such as Windows.
- Additional parts such as a mouse and Monitor.
- An Ethereum mining program as an Ethminer for Windows computers or Minergate for MAC operating systems.
Profitability- Mining Ethereum vs Bitcoin
Both Bitcoin and Ethereum have stable prices in the market. Bitcoin is currently valued at $10,000 (as at the time of writing), while Ethereum is still hovering at $800. However, when it comes to mining either cryptocurrency, keep the following points in mind:
- Mining is determined by the cryptocurrency’s system of validating transactions- both Bitcoin and ether currently use the proof of work system. Ethereum plans to shift to proof of stake, which may tremendously affect the ether miners.
- Bitcoin can best be mined using expensive ASIC machines. Ethereum can be mined using GPUs.
- The block reward for Bitcoin is 12.5 BTC, or an equivalent of $125,000 when multiplied with the current $10,000 value.
- The block reward for Ethereum is three ether coins or an equivalent of $2580 based on its current $860 value.
- Both Bitcoin and Ethereum offer additional incentives to miners.
- Most miners work through pools to speed the up the process of completing a blockchain and get rewarded.
Based on the available rewards, miners can choose either cryptocurrency and make profits. However, mining either cryptocurrency require a lot of investments. Choose your investments wisely. Finally, stay updated with intriguing content by frequently visiting our website.