Key Takeaways
- Crypto mining is a popular venture that allows people to utilize machines and obtain a portion of cryptocurrencies;
- There are numerous methods to mine cryptocurrencies, including pool mining, cloud mining, CPU/GPU mining, etc.;
- Before investing in mining equipment, consider the risks, costs, and other factors associated with crypto mining.
With cryptocurrencies entering the mainstream with a bang, more and more people every single day develop an interest in this new and strange world of blockchain. A lot of these people choose crypto because they've heard that it’s possible to make money from them. If you’re one of those people, you’re in luck, because today I want to tell you how to mine cryptocurrency.
We’ll start by covering the term itself – we’ll talk about what is cryptocurrency mining and why people bother mining cryptocurrency in the first place. Then I’ll tell you about the different ways you can mine cryptocurrency – their pros, their cons and so on.
Lastly, we’ll talk about some of the more popular coins when it comes to crypto mining, as well as the most secure wallets (such as Ledger Nano X and Trezor Model Safe 5) where you can keep your coins, and include the most reliable crypto exchange platforms (Kraken, Coinbase, KuCoin and Binance) where you can trade the coins you mine to other cryptocurrencies.
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Table of Contents
- 1. Understanding Mining
- 2. How to Mine Cryptocurrency
- 2.1. Method #1 – Cloud Mining
- 2.2. Method #2 – CPU Mining
- 2.3. Method #3 – GPU Mining
- 2.4. Method #4 – ASIC Mining
- 2.5. Method #5 – Solo Mining
- 2.6. Method #6 – Pool Mining
- 3. The Best Method to Mine Cryptocurrency
- 4. Considerations
- 4.1. Consider Your Mining Gear
- 4.2. Choose a Reliable Crypto Wallet
- 4.3. Keep Track of Your Bills
- 5. Which Cryptocurrency Should You Mine?
- 6. Conclusions
Understanding Mining
To put it into very simple terms, crypto mining is a process in which a machine performs certain tasks to obtain a little bit of cryptocurrency. This is the biggest TL;DR possible when learning how to start crypto mining, so let’s branch out a bit, shall we?
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Imagine that you have a machine that mines crypto coins. We’ll talk about the specific types of machines later on in the tutorial, but for the example’s sake, let’s just say that it’s your personal computer and you’re trying to figure out how to mine cryptocurrency.
Your PC would perform specific tasks that are required to be able to obtain even the slightest amounts of cryptocurrency. These tasks are called “Proof of Work”, and they're designed to create a fair playing field for all the different miners out there.
The tasks themselves are math equations.[1] As the demand for a specific mining pool increases, the equations become more complex. Notably, it balances the pool and promotes using better machinery.
Many more subtle factors come into play while the mining process is happening, but the general idea is that if your device contributes to the “mining”, you’ll get a share of the spoils.
That is a very short and simple way of defining what is cryptocurrency mining. Now let’s move on to what you came here to see – how to mine cryptocurrency.
How to Mine Cryptocurrency
There are a few ways you could go about cryptocurrency mining. I’ll cover the main ones here, and start from the easiest one – cloud mining.
Method #1 – Cloud Mining
If you’re looking for crypto mining ways, cloud mining is probably the most popular way to mine cryptocurrencies without having to lift a finger.
Cloud mining is a process where you pay someone (most often it’s a big corporation) a specific amount of money and “rent out” their mining machine called a “rig”, and the process of mining itself.
This rent lasts for an agreed-upon period, through which all of the earnings that the rig makes (minus the electricity and maintenance costs) are transferred to your cryptocurrency wallet.
The people or companies that offer these cloud mining services usually have huge mining facilities with multiple farms (tens or hundreds of rigs stacked and operating together) at their disposal and know perfectly well how to mine cryptocurrency efficiently.
Cloud mining has become so popular mainly because it offers the possibility to participate in the world of cryptocurrencies for people who might not have enough money to buy their rigs or who perhaps simply aren’t interested in owning a rig. It's a cost-effective solution for people wanting to try their hand at mining crypto.
There are two options of cloud mining – free and paid. Naturally, a lot of people who are looking for ways to mine cryptocurrency would gravitate towards the “free” options, but it does have its drawbacks (very slow mining speeds, extra conditions, etc.).
Paid cloud mining usually works in the following way. You can find a cloud mining host online and check out the plans that the host offers. There are usually four or five of these plans, ranging from the cheapest to the most expensive one. Some hosts even offer you the ability to create and customize your cloud mining plan.
Once you know what you want, you simply perform the transaction (meaning that you pay the host) and register your cryptocurrency wallet code. That's how you make the first steps on how to mine cryptocurrency!
Different plans cost different amounts of money and last for a variety of periods. The standard plans can go anywhere from $500 up to $5,000 and last from two years to a lifetime.
It's usually expected that you’ll break even at around the six months or one year mark, and then profit from that point onwards. No one can know for sure, though, because the prices of cryptocurrencies are very volatile and tend to sway by quite a bit.
Long-time miners who participated in cloud mining contracts are now abandoning this venture. While cloud mining alternatives is still a relatively popular crypto mining option, many people claim to lose money or make small profits that aren't worth the hassle.[2] So, make sure you do your research before committing!
Method #2 – CPU Mining
CPU mining utilizes processors to mine cryptocurrencies. It used to be a viable option back in the day, but currently, fewer and fewer people choose this method how to mine cryptocurrency daily.
There are a couple of reasons why that is. First of all, CPU mining is extremely slow. You could go on for months without noticing the smallest amount of revenue.
It’s also usually not worth it – you make very little amounts of money, but you probably spend ten times that amount on electricity and cooling. The problem mitigates itself by a bit if you can find a place that has nice cooling and cheap electricity bills, but that’s rarely the case.
So why do people still even use CPU mining, then? Well, basically because anyone with a desktop computer could do it.
All you need to be able to mine using the CPU method is just a computer and a couple of programs. It's possible to do it with a laptop, but it's very strongly not advised. Your laptop will probably fry and overheat in a matter of a couple of hours.
The fact that it’s so easy to start cryptocurrency mining attracts new CPU miners every day. Some people who are looking for how to mine cryptocurrency don’t care about the details – they just want to start the process as soon as possible, and in any way possible.
Method #3 – GPU Mining
GPU mining is probably the most popular and well-known method of mining cryptocurrencies. If you google “cryptocurrency mining”, GPU rigs are going to be some of the first things that you’ll see.
Cloud miners, for example, use GPU rigs for their services. And these guys are professionals that sometimes have hundreds if not thousands of rigs, so they probably know what they’re doing, right?
GPU mining is very popular because it’s both efficient and relatively cheap. Don’t get me wrong, the construction of the rig itself tends to be costly. However, when it comes to its hash speed and the general workforce, the GPU mining rig is great.
GPU rigs utilize graphics cards to mine cryptocurrencies. One standard rig is made out of a processor, a motherboard, cooling, rig frame and, of course, a few (2-8) graphics cards.
A typical price for a well-performing and nicely built GPU mining rig aims to be around the $3,000 price range. It's a hefty investment but will pay off much faster than, let’s say, a CPU miner. People looking for ways how to mine cryptocurrency should check them out.
Method #4 – ASIC Mining
ASICs (Application-Specific Integrated Circuits) are special devices that are designed explicitly to perform a single task, which in this case is crypto mining.
ASICs are very well-known and treasured because they produce insane amounts of cryptocurrency when compared to its competitors' GPU and CPU.
But if they're so good, why didn’t I mention them sooner? Well, mostly because they're a big subject of controversy.
You see, when the ASIC company announced its new version of the machine, the announcement caused an uproar in the cryptocurrency community. Many people have called for an outright ban on these machines.
Why? Because ASICs are so powerful, they rob other miners who're using GPU or CPU rigs of the possibility to keep up both in hash speeds and in earnings. Also, ASICs have twisted the economy of certain specific cryptocurrencies.
Imagine if the majority of earnings would go to one miner with an ASIC farm and other miners with smaller capacity for crypto mining would be left with nothing. That's why some crypto coins are ASIC-resistant to maintain a level of fairness.
Some coins that are ASIC-resistant include Ethereum and Monero. However, if you're learning how to mine Bitcoin, be prepared for competition as this coin can be mined by ASICs!
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Method #5 – Solo Mining
As the name suggests, solo mining happens when a person uses their personal equipment to mine cryptocurrencies. Solo miners connect their mining computers to a native crypto wallet and start mining to get a block reward. Make sure you choose a reliable crypto wallet to protect your assets. Some of the best choices include Ledger Nano X and Ledger Nano S Plus!
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Table: Main features of Ledger Nano X and Ledger Nano S Plus
While the process seems relatively straightforward, you won't be able to use a regular computer to mine cryptocurrencies since it's not powerful enough. That means you'll need to invest into proper mining equipment to start this process.
The rewards for solo mining are significantly higher than, let's say, pool mining but they're not guaranteed. The chances of you getting a significant incentive depend on hash power and network complexity, so it might take years for you to make a solid profit.
Also, solo mining decreased in popularity in recent years due to the difficulty of obtaining enormous amounts of hash power. Many people turned to pool or cloud mining for easier setup when learning how to mine cryptocurrency.
Method #6 – Pool Mining
Pool mining is another option that you can use to mine cryptocurrency. Mining pools consists of a group of miners that pool their computational power and network resources to mine coins. Simply put, miners come together to share their network resources and improve their chances of getting a block reward!
While the competition among individual miners remains high, pool mining allows people to mine cryptocurrency at relatively lower costs. That's because the infrastructure for finding a block for solo miners can get expensive due to electricity and associated costs.
However, each case depends on a number of factors, so make sure to evaluate your individual situation before choosing an option on how to mine cryptocurrencies. While pool mining is a popular option for both novices and seasoned miners, it might not be the best option for you.
Nevertheless, if you want to check out mining pools, you can check out one of the most famous names in the industry, Binance. The platform has a mining pool with essential information displayed on the dashboard and numerous tutorials to help you along the way!
| BINANCE | |
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Table: Main features of Binance, the leading cryptocurrency exchange
Also, it's an all-round crypto exchange that allows you to purchase coins in case you don't want to mine any. Its low fees and robust security measures cater to both novices and seasoned investors.
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The Best Method to Mine Cryptocurrency
Now that you have an understanding of how to mine cryptocurrency and about all of the different ways to do it, which one is the best way? Keep in mind that you can choose one or a few ways to mine crypto.
For simplicity, I recommend starting with one option when learning how to mine Bitcoin or other coins. The method that suits you the most depends solemnly on a few key details: are you willing to spend some initial money? If so, how much? Do you want to own a rig? Do you even want to do it with a rig?
These and many more similar questions will determine your best method for mining cryptocurrency. However, you should always do independent research about financial topics and figure out if crypto mining is something you should do in general.
Generally speaking, GPU and cloud mining seem to be the two big options that people love. CPU mining is slow and tedious, while ASIC mining could get very unpredictable, especially as of late.
If you want to build your rig, then GPU is the way to go. If you don’t want to spend a dime and just get going ASAP, you could give CPU mining a shot. However, if you’re willing to risk it and you’re not afraid of controversy – ASICs are a great bet. And finally, if you don’t want anything to do with neither rigs, nor any other type of machinery – discover cloud mining when learning how to mine cryptocurrency!
Considerations
Crypto mining is a popular term in the crypto community and many people jump on this trend in hopes of making significant profits. However, it's not always the case and you should beware of a few things when understanding how to mine cryptocurrency.
Consider Your Mining Gear
Mining gear is important if you're choosing GPU mining or ASIC mining. Most people invest up to a couple of thousand dollars in their equipment to improve hash rate, mining speed, and more. It can be a hefty investment, so make sure it's worth it in your case.
You should always compare probable profitability and evaluate your financial situation. Keep in mind that investing in software or hardware is costly and you might see slow results from your mining. There are no guarantees regarding this venture, so exercise caution!
Choose a Reliable Crypto Wallet
Getting a secure and reputable wallet (or utilizing an exchange wallet, such as that of Kraken or Binance) is the most important task when you’re starting with cryptocurrency mining. Imagine if you’d be mining for a year and all of your savings were stolen only because you didn’t pay enough attention while choosing the wallet and picked a fishy one that got hacked into.
If you’re serious and are looking for ways how to mine cryptocurrency, I would suggest buying a hardware wallet – they're the safest and most trustworthy cryptocurrency wallets out there. I highly recommend investing in a hardware wallet like the ones by Ledger or Trezor. It's arguably the safest way to store your coins as these wallets have additional security measures in place!
| LEDGER | TREZOR | |
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Table: Pros and cons of Ledger and Trezor hardware wallets
Alternatively, you can get a hot wallet and keep your assets on wallets like Coinbase Wallet. While these crypto wallets don't provide as much security as the hardware ones, it's still a solid choice. Hot wallets are more convenient as they come with mobile applications, so it's a great choice for anyone just learning how to mine cryptocurrency!
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Keep Track of Your Bills
Crypto mining comes with significant resource consumption, so you need to keep a close eye on your electricity bill! People used to profitably mine crypto when the trend just started. However, fewer new miners join this venture due to high costs and uncertain rewards.
Many reviews on Reddit claim that mining crypto is now more of a hobby than an income source due to an increase in electricity prices. You might need to mine for years to offset the incurred bill for power consumption. Therefore, evaluate if it's worth it in your case. However, you can always learn how to mine cryptocurrency for general knowledge!
Which Cryptocurrency Should You Mine?
Your choice of gear should also depend on the type of cryptocurrency mining that you've decided to do. Some of the obvious favorites would be Bitcoin, Ethereum or Dash.
Keep in mind, though, that Bitcoin mining is probably the trickiest of them all. While many online resources claim that you can learn how to mine Bitcoin for free, it might be misleading. You actually can mine it at almost no cost but the rewards you get will be almost insignificant.
Since the coin is so popular, there are many miners around the world tuning into the few mining pools and trying to snatch at least a small bit of Bitcoin. This might result in you waiting for countless hours until the first drops of Bitcoin start coming in.
That's why your best bet would probably be to stick with Ethereum or some other less-popular cryptocurrency. Depending on your method of choice, check out the prices, calculate when your return on investment would happen, do some math, and you’ll figure it out in no time!
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Conclusions
As you’ve probably noticed, there are many different ways on how to mine cryptocurrency. These are simply the main methods – if you’d like, you could even forget about mining and jump into Bitcoin faucets. But that’s a whole different story for a whole different day. But it's an option!
One thing that you should not only remember but also do right away is to create a cryptocurrency wallet. Decide on the type of cryptocurrency that you want to mine and simply look up the wallet options for that currency. I strongly recommended Ledger Nano X and Trezor Safe 5, they're truly some of the most reliable hardware wallets on the market.
You’ll have no problems finding one for coins like Bitcoin, Ethereum or Litecoin, but if you want to mine the less-known currencies, then you might need to search for a bit until you find a reputable wallet.
Well, this is the end of my tutorial on crypto mining. We’ve covered a few different topics and explored the different varieties of cryptocurrency mining methods.
Remember – the method that suits you the most will depend solemnly on what you want and what kind of resources you have, so choose carefully! The world of crypto mining is full of surprises. If you do decide to give mining a chance, I wish you the best of luck!
The content published on this website is not aimed to give any kind of financial, investment, trading, or any other form of advice. BitDegree.org does not endorse or suggest you to buy, sell or hold any kind of cryptocurrency. Before making financial investment decisions, do consult your financial advisor.
Scientific References
1. F., Calvão: 'Crypto‐miners: Digital labor and the power of blockchain technology';
2. N., Islam, Y., Marinakis., S., Olson., et. al.: 'Is blockchain mining profitable in the long run?'.
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