What is Cryptocurrency Mining?

Cryptocurrency mining, in its most basic definition, is the approval of cryptocurrency transactions by solving complex problems via devices with special software, and rewarding them with newly produced cryptocurrency in return. In theory, anyone who has a computer and internet can mine.

Transactions between wallets are transferred to a transaction pool (mempool) before being confirmed on most blockchains. These transactions are then combined to form a block. These blocks are written to the blockchain after being verified and approved by the devices connected to the network.

Cryptocurrency miners verify and confirm transfer transactions and keep a copy of the blockchain.

How to mine any cryptocurrency?

There are many methods of cryptocurrency mining nowadays. It is possible to distinguish these methods in terms of profitability, cost and difficulty.

ASIC mining

‌‌ASIC, also known as Application-Specific Integrated Circuits, are systems focused on cryptocurrency mining. Their software makes ASIC circuits an important component for cryptocurrency mining. These devices consist of a large number of processors. While this means high computational capacity, it also means a lot of energy demand. Therefore, mining with ASIC devices needs strong electrical infrastructures.

Proof-of-Work mining-based cryptocurrencies such as Bitcoin and Litecoin can only be mined with ASIC mining devices nowadays due to the need for high computational capacity.

GPU mining

The processors of computer graphics cards are called Graphics Processing Unit (GPU). GPU mining is a type of mining where transactions are verified by processors of graphics cards. The processors of graphics cards are much more powerful and computationally oriented than the processors of computers. Therefore, graphics cards are used to verify the transactions of Proof-of-Work mining based cryptocurrencies.

Graphics cards are also very affordable compared to ASIC devices. However, miners use devices that combine multiple graphics cards together, called “Rig”.

‌CPU mining

It is also possible to mine with the CPU or the central processing unit (processor). ‌CPU mining can be done easily by installing a mining software on computers used in homes.

However, this method is not used due to its low performance compared to other methods nowadays. Mining with processors has become impossible for the vast majority of popular cryptocurrencies.

Computer processors are now used in Proof-of-Stake (PoS) mining, rather than in Proof-of-Work (PoW) mining. In this form of mining, high computational power is not required, so it is sufficient to have a mining software running and to have enough cryptocurrencies in the wallet to generate income.

Cloud mining

Cloud mining is an alternative mining service offered for those who want to mine cryptocurrencies but do not have enough hardware, time, knowledge or capital.

Users who want to mine can rent processor power from cloud mining services. Then, they can direct this power to the mining pool of their choice.

Cloud mining services lease processing power for different form of cryptocurrency mining in return of a contract which considers different costs such as hardware, software, cooling, maintenance and software. A large part of the income generated in cloud mining is received by mining institutions. This results low income for users.

What is the reward of cryptocurrency mining

It takes time to profit from cryptocurrency mining, depending on the type of mining you choose, the cryptocurrency and the prices. The higher the processing power, the higher the probability of earning income. However, this means more electricity consumption. On the other hand, as the number of devices increases, the time spent on operating, controlling and maintaining for them also increases.

In order to profit from cryptocurrency mining, it is necessary to have sufficient hardware and infrastructure, space to house and cool devices, and technical knowledge to operate the devices. Especially when mining Proof-of-Work, it is important to note that the higher the difficulty level, the lower the revenues. To maintain revenue in Proof-of-Work mining, it is necessary to regularly invest in hardware and renew underperforming devices.

It is becoming increasingly common among users to mine Proof-of-Stake instead of Proof-of-Work mining due to high hardware costs and electricity consumption.

Do you know?

In order to mine, it is necessary to purchase a hardware, run a mining software, have the infrastructure to cool the devices that heat up while working and to meet their electricity consumption. If you do not have enough hardware and processor power, the cryptocurrencies you will get from mining may not be able to cover the costs of purchasing hardware and electricity. As a member of BtcTurk, you can easily buy Bitcoin and other cryptocurrencies after sending Turkish lira from your bank account.