Cryptocurrency Mining in 2024: A Comprehensive Guide, Cryptocurrency mining is central to Proof of Work (PoW) cryptocurrencies, with blockchain networks relying on miners for transaction processing and network security. Miners are given puzzles to solve, and the first one to get the right answer is rewarded with freshly minted coins. Currently, most miners on the largest networks like Bitcoin, Ethereum, and Litecoin mine through mining pools. However, a few other cryptocurrencies still allow for solo, or independent, mining. In this tutorial, we focus on how to mine cryptocurrency, letting you know which hardware is suited for which coins and why miners are important.
Breaking Down Cryptocurrency Mining We will explore cryptocurrency mining in great detail in this section. Our objective is to set out the mining process in an easy-to-understand manner and help you have a clear picture of the role miners play in any given network. You can use the information below to select a coin to mine and start mining profitably.
What is Cryptocurrency Mining? Cryptocurrency mining is the process by which blockchain networks create new coins. Mining only works with PoW blockchains, which use different types of algorithms. The Bitcoin network, for instance, relies on the SHA-256 algorithm, while Ethereum uses the Ethash algorithm. Before you decide on mining, you need to find out about the mining algorithm as this points to the type of hardware supported on the network. While some cryptocurrencies allow for the use of specialized mining equipment called ASICs, others are ASIC-resistant, making it possible to mine with a graphics card. We highlight more on this in one of the sections below. Anyone can become a miner as long as they have the right mining equipment or the computational power needed to mine a new block on the network.
In mining, special computers, also called miners or nodes, compete to solve difficult mathematical problems seeking out a value that identifies the valid block. The value is a hash (calculation) called a nonce and how long it takes to get one depends on the protocol. Bitcoin takes about 10 minutes, while Ethereum takes about 15 seconds and Ravencoin has a 1-minute block generation time. Once a miner is the first to find the value, they broadcast it to the network. The decentralized nature of the process requires that a majority of miners verify the block before it is added to the blockchain. The winning miner gets a block reward that releases new cryptocurrency coins into circulation.
Why Cryptocurrency Miners are Important? From the above section, it is clear that miners play a big role in any PoW blockchain network. It’s not just verifying transactions; their role goes a long way in ensuring the network remains safe and active at all times. How do miners do this? When verifying transactions, they do due diligence by ascertaining that no block can be added to the blockchain twice. In short, they solve the double-spending problem. Blockchains make it much easier to prevent this problem. The technology underlying cryptocurrency timestamps each group of transactions before broadcasting them to nodes. Each block also has a hash that contains a timestamp of the previous block, making it difficult for the nodes to send a transaction twice. To guarantee a higher degree of security, miners verify and validate the transactions before they are formally regarded as part of the continuously growing blockchain. Miners also secure the network by dedicating their computational power to the blockchain. Note that the number of people (miners) on a network is also essential to its security. In particular, when the number of miners increases, the network enjoys a higher hashrate. A higher network hashrate implies there are adequate active decision-makers who can avert any security risk on the network.
Cryptocurrency Mining Limitations As noted above, all Proof of Work networks use miners to process transactions and to secure the network. However, different networks approach this critical component differently, with certain limitations in place which you might need to keep in mind before you decide to mine a given coin. The first limitation is about coin supply and how these coins are released into circulation through mining. Some coins have a hard cap supply, which means there’s a fixed number of coins that will ever exist. For instance, Bitcoin has a fixed supply of 21 million BTC, which is also copied by many Bitcoin forks. Litecoin is fixed at 84 million; while Ethereum Classic is set to have a fixed supply of 210,700,000 ETC. Others like Electroneum and Ravencoin have limited their total supply to 21 billion coins. Since some miners can use superior mining devices to earn maximum returns, the capping of coin supply and the halving of block rewards are also designed to create mining difficulty. This means coin supply remains limited despite the efficiency of mining machines and the number of people joining the network.
Tip to Mine Cryptocurrencies Efficiently for Greater Profit You can make a profit mining crypto without investing in expensive mining machines or having to assemble large mining rigs just to get a higher count of hashing power. The best way to make a significant profit from mining is to identify a coin that allows you to mine via a mining pool. You then identify a pool with the lowest fees, or no fees at all, and whose operations are in a region with the lowest electricity costs. This way, your hashrate will attract less cost on power and you won’t pay a percentage every time you receive a share of the reward. – Benson Toti
Technical Aspects of Mining Cryptocurrency Explained We are going to explain the more technical aspects of crypto mining in this section. Some of the key terms we shall focus on are hashrate and processing power. We shall also help you understand the essence of having a higher hashrate and the resources you need to mine profitably.
Hashrate Simplified for Crypto Mining What does hashrate mean? Hashrate is a measure of the amount of computing power needed to mine a new block of transactions and earn a block reward. It tells you how fast a mining machine can work towards solving a new coin. The machines make several guesses every second, with each calculation called a hash. The hashrate of your computer or mining hardware lets you know how efficient a given CPU, GPU, or ASIC miner, is at completing tasks. You can also add up individual computing power contributions of miners to measure the total computing power of all participants on a cryptocurrency network. The higher the hashrate the better it is for the network.
Why is a higher hashrate important? A mining rig with a higher hashrate packs more hashing power, which means it can mine more quickly and efficiently compared to a machine with a low count. A higher hashrate of the entire network shows that more miners are active, which has a role in the increase in mining difficulty and thus mining competition. However, the most critical aspect of a higher network hashrate is that more miners equate to better decentralization. In return, there is better network protection against a 51% attack. The higher hashrate makes it difficult and highly unprofitable for bad actors to hijack the system, thereby enhancing the network’s security.
How is hashrate measured? Hashrate is measured in hashes per second or solutions per second (H/s or Sol/s) on different networks. But what this means is that you are looking at how many calculations you get per second with the hardware you have. The five common units for measuring this are kilohashes per second (Kh/s), megahashes per second (Mh/s), gigahashes per second (Gh)
