Mining Crypto Currency

As the crypto currency industry exploded into the monster it currently is, in 2017, various digital tokens and currencies have drawn more attention from the general public than even before. Obviously – given how it’s one way to acquire such currency – mining has seen increasing interest as well. Everyone new to virtual currencies wants to know what mining is, how it’s done and whether or not it is profitable.

Cryptocurrency Mining

As the top digital currency, Bitcoin is also the oldest: it has been around since 2009. In Bitcoin’s case (as with other crypto currencies), mining is a record-keeping service aimed at keeping the blockchain in shape, complete and safe, as well as unalterable. Miners are the ones who verify, collect and add newly broadcast transactions to blocks, which are linked to already existing blocks through cryptographic hashes. The linked-up nature of these blocks means that in order to alter one, all subsequent ones need to be altered as well – a feat which is obviously extremely difficult (hopefully quite impossible) to pull off.

The bane and at the same time friend of the miners is the nonce. The nonce is a number which miners need to find in order to generate proof of work for their newly mined blocks. Such blocks are not accepted into the blockchain without this proof of work. The proof of work is designed to be extremely easy for the network nodes to verify, but it is very difficult to generate. To find the nonce, miners need to try many different nonce values before the right one is located, as the difficulty target is met. The difficulty target is artificially induced, to keep the Bitcoin ecosystem in balance, and the coin valuable, due to scarcity.

Approximately every two weeks (once 2016 blocks have been mined from the last adjustment) the difficulty target is re-assessed, based on the performance of the Bitcoin network. The goal here is for new blocks to be allowed into the blockchain every 10 minutes. The more computing power exists on the network, the bigger the difficulty individual miners have to overcome to pick up their Bitcoins.

For every newly added block, miners are rewarded with 12.5 newly minted bitcoins – this number is halved roughly every four years though, so it is definitely not a constant. These bitcoins are distributed through coinbase transactions. Every single Bitcoin in existence has been earned through such a coinbase transaction.

Now that you know by and large what Bitcoin mining is and how it works, the question “is Bitcoin mining profitable?” inevitably rears its head. All crypto coin mining is a sort of arms race. Those who get in early and bring more powerful hardware to bear, are who reap the real rewards. Obviously, in Bitcoin’s case, getting in early is no longer an option. Whether or not Bitcoin mining is profitable depends on how much one is willing to invest into the effort. One way to determine whether or not Bitcoin mining is something you may want to engage in, is to use a profitability calculator. When it comes to this, you should get acquainted with a number of variables used by these calculators.

The cost of your hardware and the cost of electricity are the simplest profitability factors. If you intend to mine bitcoins, you will indeed have to start out by acquiring proper hardware. Mining on your computer/laptop has not been profitable for years now. When looking for specialized mining hardware, you should keep your eyes on the following factors: power consumption (the smaller, the better) hash-rate, and obviously: price.

What is the hash-rate? The hash-rate describes the speed at which the mathematical problems associated with Bitcoin mining (hashes) are solved. The Bitcoin network features a hash-rate of its own, but the hash-rate also depicts the number of such problems your ASIC can solve, thus essentially defining its efficiency. Hash-rates are measured in GH/s, TH/s and even PH/s (Peta-hash per second).

The number of bitcoins awarded per block (discussed above) is also a major factor in this regard. That number is currently 12.5.

The difficulty target (also covered above) is also a part of the equation, as is your time-frame (the period over which you intend to turn a profit) and perhaps most importantly: the conversion rate of your BTCs. The BTC/USD rate has exploded lately and that has obviously done wonders for miner profitability, but there are no guarantees that this trend will continue or that it won’t reverse, so this is not something one should bank on.

Currently, one of the top ASIC-rigs is the Antminer S9, which is capable of  processing 14THs per second. Costing around $2,000, such a rig will produce some $3,000 for miners per year, which will allow them to turn a modest profit, provided their electricity costs aren’t particularly steep.

Cloud mining is an alternative for those who don’t want to get their hands dirty with the technical details of BTC mining. Cloud mining is about renting computing power from a company and then using this power for BTC mining. This vertical is fraught with scams though and therefore it isn’t a really attractive alternative to “traditional” mining.

To make a long story short: in this day and age, retail miners will probably not get rich mining BTCs. What about other digital currencies though? In its beginnings, BTC was relatively easy to mine, too. There are other digital currencies out there whose “beginnings” are right now. If one intends to get in on the ground floor with these digital tokens, the time is indeed now.

While Bitcoin’s price has exploded in 2017, it is by far not the best-performing digital currency of the year. That title has been snatched by Ethereum, the digital token of the Ethereum network, which accomplishes most of what Bitcoin does, and it adds a new dimension to the game, in the shape of verifiable digital contracts.

Actually working out which altcoin is the most profitable from the point of view of the miner is quite the exercise though, given that there are hundreds of such altcoins out there. Altcoins like Dogecoin, Litecoin and Ripple do in fact appear quite attractive in this regard, but if you’re seriously considering getting involved with such currencies, you need to know that Bitcoin mining rigs aren’t exactly optimal for the mining of other currencies.

Ethereum mining is an entirely different ballgame, though it too rewards GPU power. What that means is that if you want to mine Ethereum, you’ll need to purchase a powerful graphics card. With it goes a good motherboard and at least 4GB of RAM. The good news is obviously that your Ethereum mining rig is essentially a PC. The process of building such a rig is the same as building a gaming PC for yourself. The bad news is that you won’t really be able to use the computer for anything other than ETH mining.

Solo mining isn’t particularly rewarding in ETH’s case either. Joining a mining pool is the answer to this question. Mining pools reward miners for the mining power they make available, and they smooth out the variance when it comes to ETH earnings.

Softwaring the mining rig is another challenge for miners, and those who want to set their operation up under Windows will find it especially difficult. There are guides available out there in this regard though, which take miners through the software setup process step-by-step and which are indeed easy to follow. Ethereum mining is ASIC-resistant, meaning that out of policy considerations, the network aims to keep ASIC-mining out of its equation. Ethereum – and some altcoin mining – is very memory-intensive. Memory forms a bottleneck in the process which simply cannot be bridged by throwing more GPU-power into the mix, thus ASICS simply do not make much sense with this type of crypto mining.

There are crypto-currencies which can be mined with ASICS as well as with PC-rigs, though profitability at this point is questionable for the entire altcoin scene. Digital currencies using Scrypt as their hashing algorithm all belong in this category. Litecoin is currently the most interesting such altcoin. Newly mined Litecoin blocks are allowed into the blockchain every 2.5 minutes and the reward per block is currently at 50 LTCs. Some 82 million LTCs will be issued, and currently, it is indeed possible for miners to generate a small revenue using consumer-level mining gear. It has to be noted though that only AMD Radeon video cards should be used, as nVidia mining isn’t profitable.

Feathercoins can be mined with consumer grade equipment too. Similar in many respects to LTC, Feathercoins are only worth some $0.08 right now. This currency may indeed present miners and investors with the best opportunity to get in on the ground floor, as they say. While profitability at this point is massively hindered by the small valuation of the virtual commodity, Feathercoins can be mined at a much faster rate than their more expensive peers. Some 336 million Feathercoins are set to be issued and block discovery time has been set to 2.5 minutes. Those who do mine a new block, are rewarded with 200 FTCs. As said above, FTC profitability hinges greatly on future adoption and valuation. Given though that the altcoin market is slowly but surely nearing saturation, the odds in this regard are on par with winning the lottery – as some specialists put it.

Also using Scrypt hashing, Dogecoins are worth more than FTCs but less than LTCs. DOGE has been designed to eliminate the temptation to hoard, through massive volumes and relatively low value. Some 100 billion Dogecoins are set to be issued and the block discovery time on the network is 1 minute. The reward for a new block is currently 250 coins, which is indeed among the most generous. DOGE is relatively easy to mine with consumer-grade hardware, and it too favors AMD cards over nVidia ones.

Peercoin has taken a clear stance against large-scale mining operations, through its proof-of-stake requirement. Proof-of-stake is used in addition to proof-of-work, to distribute new Peercoins. There is no set limit on the amount of Peercoins that will be mined. Block discovery time is 10 minutes and 100 coins are awarded for every newly mined block. User adoption is currently the Achilles’ heel of this currency, though that could well be said about most of the other currencies covered on this page too.

Its mining difficulty also low, Megacoin uses Script hashing algorithm. Worth only some $0.26, Megacoins represent an attractive starting point for miners, who may one day cash in on its increasing value. The problem with Megacoin (or its main attraction according to some) is the fact that Kim Dotcom is rumored to be involved with it.

The bottom line is that if you’re looking to get rich mining crypto currency, the odds you’re facing are about the same as winning the lottery. For most people, simply buying and holding digital coins is a more straightforward way to playing the market. As a hobby though, and as a small revenue-trickle, mining is great.

If you’re interested in becoming a Bitcoin miner, you may enjoy reading about the best Bitcoin mining hardware available, the Bitmain Antminer S9. Or read about GPU mining of Ethereum, Zcash and Monero.

If you want to experiment with a legit cloud mining site, we suggest trying NiceHash.

Need to report a mining related fraud? Leave a comment below or contact us.

Cryptocurrency Mining – Reviews and Information

15 Comments

Leave a Reply