How to mine cryptocurrency?

Is it worth your time to mine for cryptocoins?

Mining cryptocoins is an arms race that rewards early adopters. You might have heard of Bitcoin, the first decentralized cryptocurrency that was released in early 2009. Similar digital currencies have crept into the worldwide market since then, including a spin-off from Bitcoin called Bitcoin Cash. You can get in on the cryptocurrency rush if you take the time to learn the basics properly.

Which Alt-Coins Should Be Mined?

If you had started mining Bitcoins back in 2009, you could have earned thousands of dollars by now. At the same time, there are plenty of ways you could have lost money, too. Bitcoins are not a good choice for beginning miners who work on a small scale. The current up-front investment and maintenance costs, not to mention the sheer mathematical difficulty of the process, just doesn't make it profitable for consumer-level hardware. Now, Bitcoin mining is reserved for large-scale operations only. 

Litecoins, Dogecoins, and Feathercoins, on the other hand, are three Scrypt-based cryptocurrencies that are the best cost-benefit for beginners. At the current value of Litecoin, a person might earn anywhere from 50 cents to 10 dollars per day using consumer level mining hardware.

Dogecoins and Feathercoins would yield slightly less profit with the same mining hardware but are becoming more popular daily. Peercoins, too, can also be a reasonably decent return on your investment of time and energy.

As more people join the cryptocoin rush, your choice could get more difficult to mine because more expensive hardware will be required to to discover coins. You will be forced to either invest heavily if you want to stay mining that coin, or you will want to take your earnings and switch to an easier cryptocoin. Understanding the top 3 bitcoin mining methods is probably where you need to begin; this article focuses on mining scrypt coins.

Also, be sure you are in a country where bitcoins and bitcoin mining is legal.

Is It Worth to Mine Cryptocoins?

As a hobby venture, yes, cryptocoin mining can generate a small income of perhaps a dollar or two per day. In particular, the digital currencies mentioned above are very accessible for regular people to mine, and a person can recoup $1000 in hardware costs in about 18-24 months.

As a second income, no, cryptocoin mining is not a reliable way to make substantial money for most people. The profit from mining cryptocoins only becomes significant when someone is willing to invest $3000-$5000 in up-front hardware costs, at which time you could potentially earn $50 per day or more.

Set Reasonable Expectations

If your objective is to earn substantial money as a second income, then you are better off purchasing cryptocoins with cash instead of mining them, and then tucking them away in the hopes that they will jump in value like gold or silver bullion. If your objective is to make a few digital bucks and spend them somehow, then you just might have a slow way to do that with mining.

Smart miners need to keep electricity costs to under $0.11 per kilowatt-hour; mining with 4 GPU video cards can net you around $8.00 to $10.00 per day (depending upon the cryptocurrency you choose), or around $250-$300 per month.

The two catches are 1) the up-front investment in purchasing 4 ASIC processors or 4 AMD Radeon graphic processing units, and 2) the market value of cryptocoins.

Now, there is a small chance that your chosen digital currency will jump in value alongside Bitcoin at some point. Then, possibly, you could find yourself sitting on thousands of dollars in cryptocoins. The emphasis here is on 'small chance', with small meaning 'slightly better than winning the lottery'.

If you do decide to try cryptocoin mining, definitely do so as a hobby with a very small income return. Think of it as 'gathering gold dust' instead of collecting actual gold nuggets. And always, always, do your research to avoid a scam currency.

How Cryptocoin Mining Works?

Let's focus on mining 'scrypt' coins, namely Litecoins, Dogecoins, or Feathercoins. The whole focus of mining is to accomplish three things:

1.  Provide bookkeeping services to the coin network. Mining is essentially 24/7 computer accounting called 'verifying transactions'.
2.  Get paid a small reward for your accounting services by receiving fractions of coins every couple of days.
3.  Keep your personal costs down, including electricity and hardware.

The Laundry List: What You Will Need to Mine Cryptocoins

You will need ten things to mine Litecoins, Dogecoins, and/or Feathercoins.

1. ·         A free private database called a coin wallet. This is a password-protected container that stores your earnings and keeps a network-wide ledger of transactions.
2. ·         A free mining software package, like this one from AMD, typically made up of cgminer and stratum.  
3. ·         A membership in an online mining pool, which is a community of miners who combine their computers to increase profitability and income stability.
4. ·         Membership at an online currency exchange, where you can exchange your virtual coins for conventional cash, and vice versa.
5. ·         A reliable full-time internet connection, ideally 2 megabits per second or faster speed.
6. ·         A hardware setup location in your basement or other cool and air-conditioned space. 
7. ·         A desktop or custom-built computer designed for mining. Yes, you may use your current computer to start, but you won't be able to use the computer while the miner is running. A separate dedicated computer is ideal. Tip: Do not use a laptop, gaming console or handheld device to mine. These devices just are not effective enough to generate income.
8. ·         An ATI graphics processing unit (GPU) or a specialized processing device called a mining ASIC chip. The cost will be anywhere from $90 used to $3000 new for each GPU or ASIC chip. The GPU or ASIC will be the workhorse of providing the accounting services and mining work.
9. ·         A house fan to blow cool air across your mining computer. Mining generates substantial heat, and cooling the hardware is critical for your success.
10. ·         Personal curiosity. You absolutely need a strong appetite for reading and constant learning, as there are ongoing technology changes and new techniques for optimizing coin mining results. The most successful coin miners spend hours every week studying the best ways to adjust and improve their coin mining performance.

What is cryptocurrency mining?

Ever wondered how bitcoins are actually made?

Over the past several years, cryptocurrencies like Bitcoin have been quietly growing in popularity, with an ever-larger number of people buying and selling them. Now that Bitcoin has hit the mainstream and become a worldwide phenomenon, more people than ever are looking to get into the cryptocurrency game.

However, the production of cryptocurrencies isn't anything like that of regular money. There's no central authority that issues new notes; instead, bitcoins (or litecoins, or any of the other so-called 'alt-coins') are generated through a process known as 'mining'. So what is cryptocurrency mining, and how does it work?

Cryptocurrency mining and the blockchain

Before getting to grips with the process of cryptocurrency mining, we need to explain what blockchain is and how that works. Blockchain is a technology that supports almost every cryptocurrency. It is a public ledger (decentralised register) of every transaction that has been carried out in that cryptocurrency.

These transactions are assembled into what are called "blocks". These are the verified to ensure they are legitimate by cryptocurrency miners. This checks if the same coin hasn't been expended again before the transaction has cleared, and that the input and output expenses tally. Then the next sequential transaction block is connected to it. This is how cryptocurrencies are created and how new cryptocoins are made.

Mining new blocks

As there is no central authority or central bank, there has to be a way of gathering every transaction carried out with a cryptocurrency in order to create a new block. Network nodes that carry out this task called dubbed 'miners'. Every time a slew of transactions is amassed into a block, this is appended to the blockchain. Whoever appends the block gets rewarded with some of that cryptocurrency.

To prevent the devaluation of the currency by miners building lots of blocks, the task is made harder to conduct. This is achieved by making miners solve complicated mathematical problems called proof of work'.

Calculating hashes

In order to successfully create a block, it must be accompanied by a cryptographic hash that fulfills certain requirements. The only feasible way to arrive at a hash matching the correct criteria is to simply calculate as many as possible and wait until you get a matching hash. When the right hash is found, a new block is formed and the miner that found it is awarded with units of cryptocurrency.

Think of it like one of those competitions where you have to guess the weight of the cake - only you get unlimited guesses, and the first one to submit a correct answer wins. Whoever can make guesses at the fastest rate has a higher chance of winning.

Cryptocurrency mining limits

In practice, this means that miners are competing against each other to calculate as many hashes as possible, in the hopes of getting to be the first one to hit the correct one, form a block and get their cryptocurrency payout.

However, the difficulty of calculating the hashes also scales - every new block of bitcoins becomes harder to mine. In theory, this ensures that the rate at which new blocks are created remains steady. Many cryptocurrencies also have a finite limit on the amount of units that can ever be generated. For example, there will only ever be 21 million Bitcoins in the world. After that, mining a new block will not generate any bitcoins at all.

Cryptocurrency mining requirements

Although you were once able to mine your own cryptocurrencies using a standard PC, this isn't viable any longer; the quality and quantity of hardware you need to mine effectively increases in line with the volume of people mining. That's seen requirements leap - from a reasonably-powerful processor, to a high-end GPU, to several GPUs working in conjunction, to -now - specialised chips specifically configured for cryptomining.

Nowadays you will have to spend upwards of $1,000 on the appropriate hardware to mine most modern cryptocurrencies with any success. The energy consumption, meanwhile, is substantial - and you'll need to keep an eye on these rising costs while running your machine 24/7. Most miners will spend the overwhelming majority of their income from mining on paying to maintain and run the equipment.

As the Bitcoin hype is more or less fully nestled in the wider public consciousness, organisations have invested increasingly considerable sums into it, effectively industrialising cryptocurrency mining. Large warehouses packed to the brim with floor-to-ceiling racks of expensive graphics cards, working towards the sole aim of mining new units of Bitcoin, Ether, Litecoin, and so on, have become the new normal.

The Bitcoin network - to add some context - processes 5.5 quintillion hashes per second, which means that unless you have the equipment capable of processing a massive quantity of calculations in a very short space of time, the chances of you being able to compete with the more industrial operations are miniscule. For this reason, miners often band together and pool resources to maximise their chances of profiting from the cryptocurrency mining game - creating 'mining pools' - sharing their power, as well as any returns their efforts may generate between them.