What is Cryptocurrency Mining?

Cryptocurrency mining, in its most basic definition, is the approval of crypto money transfer transactions by solving complex problems by devices with special software and hardware, and as a result, rewarding with newly produced cryptocurrency. In theory, anyone with a computer and internet can mine.

Transfers between wallets are transferred to a mempool before being approved on most blockchains. Then, these transactions are 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 Is Cryptocurrency Mining Made?

There are many ways to mine cryptocurrencies today. It is possible to separate these methods in terms of profitability, cost and difficulty.

‌ASIC Mining
‌‌ASIC are systems focused on cryptocurrency mining. The software and special hardware in them make these circuits special hardware to perform cryptocurrency mining. Although ASIC devices, which consist of many processors, have high computational capacity, they consume a lot of energy. For this reason, miners mining with ASIC devices need strong electrical infrastructures to meet their electricity consumption.

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

‌GPU Mining
The processors of computer graphics cards are called GPUs. GPU mining is a type of mining where processes are verified by calculating the processors of graphics cards. The processors of graphics cards are much more powerful and computationally oriented than the processors of computers.

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

CPU Mining
It is also possible to mine with a CPU. By installing a mining software on computers used at home, ‌CPU mining can be done easily.

However, nowadays this method is almost never used because of its low performance compared to other methods. For the vast majority of popular cryptocurrencies, mining with processors has become impossible.

Computer processors are now used in Proof of Stake — Po mining instead of being used in Proof of Work mining. In this type of mining, high computational power is not required, so it is sufficient to have the mining software running and to have enough cryptocurrencies in the wallet to generate income.

Cloud Mining
Cloud mining is an alternative mining service 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 and direct this processing power to the mining pool they want to mine cryptocurrencies.

Cloud mining services lease processing power for different types of cryptocurrency mining with term contracts. It offers various contracts with users by considering different costs such as hardware, software, cooling, maintenance and software. Mining revenues are higher, although contracts that pay for operating costs may appear more expensive. Mining revenues are further reduced in contract packages with lower wages and some of the operating costs covered by mining revenues.

Although it seems to be less costly than other types of mining, it is getting more difficult for users who prefer the cloud mining method to make a profit with each passing day.

How Much Does Cryptocurrency Mining Earn?

It takes time to profit from cryptocurrency mining, depending on the type of mining, cryptocurrency and prices you choose. It is necessary to buy a hardware and wait for it to pay off or pay for the fees paid for cloud mining. Although the probability of income increases as the processor power increases, the electricity consumption increases, it becomes difficult to operate more devices together and to cool these devices. As the number of devices increases, so does the time spent operating, controlling and maintaining the devices.

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’s 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, renewing devices with declining performance.

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