The cryptocurrency boom in the last few years attracted interest from people trying to make profits. While you can buy tokens with ease and speed, cryptocurrency mining is also a possibility. You can use certain computing equipment to generate or earn digital assets online.
One thing every passionate miner needs to understand is that mining could cost them more than they earn. Therefore, a well-thought-out plan is required to turn mining into a profitable business. Before we explain how to mine cryptocurrency, let’s take a quick look at what cryptocurrency mining really means.
What is cryptocurrency mining?
Simply put, the process by which a network of specialized computers creates new coins and validates new transactions is called mining. A large network of decentralized computers verifies and secures blockchains. In other words, in return for contributing your processing power, you’re rewarded with new coins.
The cryptocurrency mining process does not involve any governing body that controls or confirms transactions. Proof-of-work model is what miners use to check transactions with their powerful computers. As a miner, your computing device will solve complex mathematical problems and then you show proof of doing the work by providing the right answers.
In return, you get the right to confirm a block of a particular crypto’s transaction. After confirmation, that block is added to the blockchain. Not sure what blockchain really means? It’s a distributed digital ledger or database where transactions are recorded.
Types of Mining Equipment
To further understand the concept of cryptocurrency mining, you need to learn about the various types of crypto mining.
1. GPU mining
GPU mining, as the name suggests, uses one or more graphics processing units. A large number of miners have moved from CPU to GPU mining to mine large-cap cryptocurrencies. Why? Because GPUs are more efficient and offer a lot better hash rate than CPUs.
When using CPUs, you measure hash rate in kh/s or kilo hashes per second. On the other hand, GPUs measure hash rates in mh/s or mega hashes per second. To put this into perspective, 1,000 kilo hashes equal one mega hash or one million hashes.
While the performance of GPU units varies based on their price and model, some of the leading GPUs offer 10 mh/s to 60 mh/s, so the average GPU miner has 2,000 times as much hashing power as an average CPU miner.
You can now better understand why GPU miners are far more efficient than CPUs. Passionate miners build rigs of 6 to 12 GPUs to level up tier mining power. The price of GPU miners ranges from $300 to $2000 on popular markets like eBay. Make sure to buy a GPU that fits your budget and offers an incredible hash rate. Here are some recommendations:
- NVIDIA GeForce RTX 3060 Ti
- AMD Radeon RX 5700 XT
- NVIDIA GeForce RTX 2070
2. ASIC mining
ASIC mining is when you use an application-specific integrated circuit (ASIC). These mining devices are designed specifically to mine crypto. We just mentioned that the computing power of a GPU is measured in mh/s. An ASIC miner is way more powerful than a GPU: we usually measure the power of an ASIC in th/s or tera hashes per second where one tera hash equals 1,000 mega hashes or one trillion hashes.
Simply put, top ASIC miners are far more powerful than some of the best GPU miners. However, ASIC miners are expensive devices that usually range from $2,000 to $15,000. As a beginner miner with a limited budget, it’s difficult to consider an ASIC to mine cryptocurrency. While ASIC miners are very costly, they can be profitable. Here are some top-rated ASIC miners available in the market:
- Antminer S19 Pro
- WhatsMiner M30S++
3. CPU mining
You can mine crypto using a computer’s central processing unit. Mining coins using your CPU sounds like a convenient and affordable way. Doesn’t it? However, CPUs don’t provide as much mining power like ASICs or GPUs. Your profits with CPU mining would be minimal. When it comes to mining Bitcoin or other large cap blockchains, using CPU mining wouldn’t be a good idea as their hash power is too low.
Types of Crypto Mining
1. Mining pools
Imagine you’re a part of a group of people interested in working together to mine crypto and share block rewards. This is exactly how mining pools work. Every miner in the group gets a small percentage of block rewards. However, at the same time, miners must pay a small fee.
Crypto mining pools distribute and gather back mining tasks from members using an algorithm. It would be ideal to join a Bitcoin mining pool that assigns difficult tasks to members with higher hash rates and easy tasks to beginners or smaller miners.
If you want to mine in a pool, finding the right mining pool is critical as it can save you money. While platforms like Slush Pool and Poolin are recommended for starters, here are some other popular mining pools:
- Binance Pool
- SBI Crypto
2. Cloud mining
Cloud mining is another method to mine crypto. This way, you pay a company to mine crypto on your behalf with their computing equipment. As a miner, you let a company mine crypto for you under certain terms and conditions. In most cases, the terms are more advantageous for the company and the miner.
If you want to outsource the computational work required to mine cryptocurrencies like litecoin, dogecoin and Bitcoin, cloud mining is the solution. You don’t have to buy expensive GPUs or ASIC miners to mine coins yourself.
Simply, rent out the computing power of a cloud mining company operating anywhere in the world. To get started, all you need to do is pick a cloud mining provider, select the coin you want to mine, and sign up. However, each site comes with varying fees and services. What follows are some of the best cloud mining sites:
- Genesis mining
3. Solo mining
If you don’t want a cloud company to mine on your behalf, you can use solo mining as an independent way of building digital assets. Nevertheless, mining on your own is a challenging task. People often prefer mining in pools because there’s no guarantee when it comes to solo mining.
While solo mining offers rewards and profits, it doesn’t offer the same dependable income as mining pools do. Why? Because, when working in pools, members increase their chances of finding a block.
These types of crypto mining and mining equipment will help you make a better decision depending on your unique situation or how much you can afford to invest. One of the best ways is to go with either GPU or ASIC mining and be a part of a mining pool.
Here is how to mine crypto
So, how do you want to mine crypto? Do you want to go with solo mining or cloud mining? What crypto do you want to mine? While Bitcoin and Ethereum are two of the most popular crypto currencies, you should also look for cryptocurrencies that use proof of work. For example, Kadena is one of the profitable cryptocurrencies to mine with an ASIC. Likewise, Dogecoin is also a good option when it comes to mining crypto with an ASIC. If you want to use a GPU to mine something, consider Ergo.
Here are some basic steps on how you can mine crypto:
1. Set up equipment
Once you’ve decided which crypto to mine and what type of mining to use, the next step is to buy and set up equipment. You can use GPUs or ASICs to mine crypto. Using a CPU is not likely to be an ideal way of mining something because you wouldn’t make more than one dollar per day.
When buying a device, you should compare profits using a profitability calculator. The profit is calculated based on your mining machine’s hash rate, your electricity cost, and how much you would earn per day. You can use tools like NiceHash Profitability Calculator to calculate profits or compare different devices. CryptoCampare is also a useful platform to calculate crypto mining profits. No matter what equipment you want to use, be sure to compare the potential earnings of your hardware.
2. Set up your crypto wallet
You need a wallet to receive crypto rewards. It’s not a complicated process to choose a compatible wallet and sign up. Cryptocurrency platforms recommend compatible wallets. After setting up your wallet, you would be able to receive and store your cryptocurrency.
If you’re not sure what wallet to use to store and secure your cryptocurrency, here is what Business Insiderrecommends as well as a couple of others from our list:
- Ledger crypto wallet
- Trezor crypto wallet
- Exodus crypto wallet
- Electrum crypto wallet
- OPOLO crypto wallet
3. Configure your device
There are a number of things you need to do to configure your mining equipment, but the first step is to download the mining software for the crypto you want to mine. Go to the cryptocurrency’s site to find the right software. The following are the top 5 popular Bitcoin mining software:
- Awesome Miner
While most mining software is free and compatible with leading operating systems, be sure to pick the right software.
Lastly, make sure to place your mining equipment at a safe location with proper cooling to keep it safe and functioning and consider joining a mining pool as earning rewards isn’t easy when you are mining alone. The majority of miners prefer working within pools.
If you’re a crypto enthusiast, you should start mining crypto as a hobby to earn some extra bucks. It could take six months or longer to break even on your equipment especially that electricity cost is a big factor when it comes to mining crypto because it’s an energy-intensive process. However, mining crypto might not be a good idea for traditional investors who are looking to make big money in no time.
If you’re ready to mine your favorite crypto, be sure to read detailed guides to simplify each and every step along the process.