Since the dawn of Bitcoin in 2009, many have been intrigued by the potential of cryptocurrency especially with its wide range of unique applications and distinct advantages. Being independent of any organization or government regulation, pioneers such as early adopters and enthusiasts in the crypto industry started to mine the currency—in an effort to secure the coin’s network and increase the supply of coins.
In the early days, crypto or token mining merely required a couple of computers with standard multi-core CPUs. Although its prerequisites were fairly basic, the practice was vastly exclusive to the limited community of crypto pioneers. Over the course of 10 years, however, a lot has changed in the nature of mining cryptocurrencies—evolving into a much more complicated process that requires specialized equipment. The good news though, is that as the industry started to grow, so did the community of miners. With the rise of the value of crypto coins and increased number of miners came the influx of information and data, allowing just about anyone to get set up and going in the crypto mining game.
With all kinds of specialized tools, software, communities, and platforms available today, this post aims to help you get the fundamentals down before you start venturing into the world of cryptocurrency mining.
The Evolution of Crypto Mining
Because the value of cryptocurrency has increased in recent years, crypto mining has become more and more popular across the globe. Although, it is due to this very reason that the difficulty of mining has increased as well. Back in 2009, early miners could make a few bucks per day with just their standard home computers.A year later, miners started to use multiple graphics processing units (GPUs) for faster mining. One drawback with GPUs though is their high energy demand, leading to the creation of Field-Programmable Gate Arrays (FPGA) in 2011. Then, in 2012 the application-specific integrated circuit was released—a better and faster hardware which paved the way for enterprise mining. Despite this, there is still hope for individual mining to be profitable with the right combination of knowledge and technology.
Crypto Mining in a Nutshell
Cryptocurrency follows a decentralized system rather than centralized control like in fiat currencies such as USD, EUR, and AUD. This means it uses a distributed ledger, also known as a blockchain—simply put, it is a highly encrypted digital database of every transaction in the currency’s history.
Crypto transactions are recorded and uploaded into a block. A single block contains roughly about 2,500 transactions before it is added to the chain, creating a blockchain. To ensure the security of the system, each block is heavily encrypted with hashing algorithms—a complex mathematical puzzle that must be solved to verify all transactions are legitimate. Only by decoding these math puzzles will a block be added to the blockchain or digital ledger.
Enter, crypto miners—individuals who race to successfully solve the blocks whenever a new puzzle is released. As an incentive, once a block’s puzzle is solved, newly created coins are released to the miners who have contributed to the solution. Aside from securing the cryptocurrency network, this process also helps in increasing the supply of crypto coins. At its core, token mining is the process of confirming and adding transactions into the blockchain through solving the hashing algorithms.
Advantages of Crypto Mining
1. Earning Coins
Because the crypto industry has been booming since its inception, more and more people are beginning to see its value. Through mining or by successfully solving the equations encoded into every block of the crypto blockchain, miners have the power to earn a significant amount of cash through the profitable incentive of gaining valuable coins. On top of mining being lucrative, this can theoretically be done in the comfort of your own home.
2. Security of Coins and transactions
With hundreds of miners working together around the world to verify and secure every transaction made in the cryptocurrency market, you can sleep well at night knowing your coins are safe. Unlike the traditional fiat currencies such as USD, EUR, and AUD, it is theoretically impossible to “cheat” the cryptocurrency system.
3. Decentralized System
With no central institution in charge and government oversight, cryptocurrency is essentially a platform by the people and for the people. Unlike sovereign currencies, cryptocurrency has fewer restrictions, transaction fees, tax charges, and other interference and limitations—allowing it to flow more freely. By supporting the cryptocurrency market, you are, in turn, supporting the decentralization of systems.
Disadvantages of Crypto Mining
1. Risk of depreciation
Just like other assets and sovereign currencies around the world, crypto coins face the risk of decreasing in value or worse, losing their value entirely.
2. High cost of mining
Many miners choose to invest in quality mining equipment, making the upfront costs very high, often reaching thousands of dollars. Aside from the equipment, adding to the bill, crypto mining demands high levels of electricity to successfully verify transactions in less than 10 minutes.
Due to the exponential increase in the value of crypto coins, it has become even more challenging to win the race and actually make a profit from token mining.
It’s important to note that the crypto mining industry, just like cryptocurrencies themselves, is still in its infancy. The landscape is still evolving at an extreme rate, which implies that whatever’s working right now might not work tomorrow.
As technology and trends in the cryptocurrency industry continue to evolve, it is important to be in-the-know and keep your eyes peeled for regular updates from the Noah Coin Blog.