How to mine cryptocurrency? Cryptocoin mining explained

Cryptocurrency rush

"The price of Bitcoin has exceeded 3,000 USD", "Vladimir Putin and Vitalik Buterin Discuss Ethereum ’Opportunities’", "Nvidia, AMD to Release Cheaper Bitcoin Mining GPUs"—these are the latest headlines, in which cryptocurrency shows up with noticeable regularity.

Cryptocurrencies and mining are a hot topic in today’s world, and everyone of those who’s ever heard about it, probably, at least once, asked themselves the questions "what is cryptocurrency?", "where to get cryptocurrency?", "should I start mining?", etc. In this article, we’re going to talk about how and what cryptocurrencies to mine.

Cryptocoin mining as it is

Content

1. What is cryptocurrency
2. What is mining?
3. People mine as they please
4. What to mine?
5. How to mine cryptocurrency?
6. What to do with mined coins?
7. Conclusion

What is cryptocurrency?

Cryptocurrency is a decentralized digital monetary system whose most basic unit is a cryptocoin. The cryptocoin is made up of encrypted information, this is why it is impossible to forge or duplicate it.

«Encrypted money» is generated within the network and isn’t controlled by central banks or governments. This where it derives its value from.

The first and the most famous cryptocurrency which became the rightful symbol of the crypto world, Bitcoin, came into existence on October 31, 2008, as a concept authored by someone (or someones) named Satoshi Nakamoto. January 3, 2009, at 18:45 UTC, the very first block was generated.

Bitcoin «in the flesh»

Benefits of Bitcoin

• Decentralization and accessibility—the Bitcoin network is comprised of individual wallets and a distributed chain of blocks spread across computers within the network.

• Transparency of transfers—all transactions are displayed in a publicly accessible registry, and it’s abundantly clear who sent funds to who, when and how much.

• Freedom of choice—you can install either the full Bitcoin Core client; or the light version without autonomous functionality and blockchain analysis; or the online/mobile wallet for basic transactions.

• Equality among participants—there is no inner control mechanism: noone is able to freeze an account or cancel a payment.

• Anonymity—the only information about a wallet’s owner is a 34-digit account number in the system, no names.

• The possibility of mining—anybody can earn cryptocurrency through mining.

• Outstanding security—as the number of blocks increases, so does the required computing power to process the entire blockchain, which gets increasingly harder to hack into.

• Deficit—cryptocurrency is digital gold, and it is finite: there are going to be only 21 million bitcoins in total, which prevents potential inflation.

What is mining?

Generation of new cryptocurrency units, or, in other words, «mining», is a process of solving a mathematical task of finding combinations of symbols that match certain requirements.

The goal is to transform one string of symbols into another string, so that it starts with a certain set of symbols. And the result of that transformation is a hash combination. In order for a transformation to be approved, it must be in tune with all previous events in the chain.

A cryptocurrency is one gigantic line of code which constantly takes in new pieces. That code contains everything: information about wallets, history of transactions between wallets, and so on. It’s also called a hash sum.

In order to generate new cryptocurrency units and add them to the existing ones, computers and ASIC devices are used. Machines find an array of numbers and add it to the previous hash sum, and, thus, get a third one which meets certain criteria.

Finding solutions to this kind of tasks requires immense processing powers. Nobody would bother doing it, if it were not for the reward. A user spends processing power and earns cryptocurrency units. The entire crypto money supply in circulation increases by that very amount.

As time goes by, the number of yet unsolved blocks goes down, and it gets harder to solve them, which translates into higher processing power requirements.

"Dogecoin miners"

People mine as they please

2 ways of mining

As it was said previously, mining difficulty is constantly rising. Not long ago, cryptocoins could be mined on very basic home computers. In 2011, a powerful graphics card could pay for itself in just two weeks. But today, mining requires serious mining rigs, and those cost quite a lot.

Such super rigs are made up of high-performance GPUs, that were created specifically for the most difficult computational tasks.

As stated before, mining is also done with ASIC-devices. They are more effective, but are very limited in usage—they are good for cryptocurrency mining only. They vary in size and capability: from small ones that look like USB thumb drives, to big and powerful that are reminiscent of microwave ovens.

Mining in numbers

Let’s compare the performances of a top-notch GPU, AMD Radeon RX 580, and a massive ASIC device, AntMiner S9: RX 580 costs around 700 USD and tops out at 1.22 ghash/sec (when mining Decred) while consuming 185 watts; S9 costs around 2000 USD and is capable of 14 thash/sec (when mining Bitcoin) while consuming 1350 watts. The ASIC is more powerful, but costs more and consumes a lot more electricity.

AMD Radeon RX 580

AntMiner S9

In 2015, 1.5 terawatts of electricity were funneled into global mining, which is comparable with the energy consumption of a big city. Most miners live in China, and they mine hard—they erect gigantic mining farms.

The largest farm is located in Hong Kong. That farm alone accounts for 4% of the world’s bitcoin network capacity or 35 thash/sec. It produces 26 bitcoins a day.

Chinese bitcoin farm

Cloud mining

In the wake of rising mining difficulty and diminishing returns of individual mining, cloud mining came along. The model is this: a group of people purchases and sets up equipment specifically for cryptocoin mining, and rents it out. The maximum profitability of such mining is 200% a year. In this way, you wouldn’t have to plunder your savings to buy equipment, the only thing that would be necessary is rental payments.

Mining pools

Another alternative to «mining on your own» can be participation in mining pools, communities of miners. In such communities miners work collectively, and the reward is divided among the participants relative to their input. A pool is displayed in the system as an individual miner, that operates at hundreds of ghash/sec. As a matter of fact, it is a head server that charges a commission in the form of a certain percentage of a block sum that the entire pool earns in the process of mining. The rest of the reward is divided among miners.

What to mine?

There are hundreds of cryptocurrencies today, and most of them are not going to achieve success. Obviously, there is no point in wasting processing power on such hopeless currencies. This is why, in order to choose what to mine, one should study the market first. It is profitable to mine cryptocurrencies that just appeared on the horizon but are already rising in price and demand.

To find out what specific cryptocurrencies you should mine, learn how much power your GPU can put out, and run that number through a mining calculator (for example, <a href="http://profit-mine.com/#!/gpucalc">this one</a>). The calculator will show how much you could earn and what cryptocurrency will be the best to mine in your case. That currency must have a high market cap (check here).

Essence of mining

How about bitcoin mining?

In 2013, 50 BTC were given in reward for one solved block, in 2015–25 BTC, in 2017–12.5 BTC. The total number of these coins is getting closer to the final 21 million, as the number of the yet «unmined» coins is decreasing. On the other hand, the price of Bitcoin has grown considerably: in 2013, it cost 100 USD, in 2015–300 USD, in 2017–3000 USD.

But in a solo bitcoin mining attempt, you would have to compete with those huge Chinese bitcoin farms, which may not be reasonable. In such a contest, it’s unlikely that you would outperform them, this is why you should target other cryptocoins for mining. Those, whose difficulty is not as high yet, and profitability—not any lower.

How to mine cryptocurrency?

All cryptocurrencies have a lot in common in terms of mining setup and launch. The above-mentioned calculator showed that the most profitable cryptocurrency to mine with NVIDIA GeForce GTX 980 is ZClassic, which is why we’ll use that cryptocoin as an example.

ZClassic is a fork (derivative) of ZCash, a decentralized coin with great protection and absolute privacy. Unlike ZCash, ZClassic has no investors that could influence its development. Overall, it is a great and promising cryptocurrency that is good for mining.

ZClassic wallet

Let’s start off with the easiest part—setting up the wallet software. Go to http://zclassic.org/ and download Eleos (compatible with both ZClassic and ZCash).

ZClassic client selection page

When installed, you can create an unlimited number of addresses of 2 types: Transparent and Private. In order to transfer what you’ve mined to your wallet, you need a Transparent address.

Eleos—ZCash and ZClassic wallet

Mining pool and miner setup

The ZClassic official website provides links to mining pools where the cryptocurrency can be mined. You can choose any pool, but we’ll use Supronva as an example.

ZClassic official website

The pool’s website meets us with a comprehensive instruction on how to set up our miner—a simple program that will be mining for us:

Miner setup instructions

1. Register an account with the pool. You can choose any name as you please, but we’ll use just ‘PoolAccountName’.

2. Create a worker—it’s the name of a miner computer within the pool. Similarly, we’ll call ours just ‘WorkerName’. Set a password for it—’WorkerPassword’.

3. Now download a folder with the miner program inside. In our case, it is Windows version of Nicehash CPU+GPU miner with Suprnova support. Extract the folder and create a text file inside of it, name it as start.txt and rename as start.bat.

4. Open the start.bat file with notepad and put your account information, worker information, and worker password in it.

   
   

   Notepad file containing miner settings
   

5. Close, save and launch the file. The miner will immediately start mining ZClassic.

   
   

   Miner interface
   

6. Information about solved blocks and earnings will be displayed in the pool statistics.

   
   

   Mining pool statistics
   

7. The last thing you might want to do is transfer your earnings from the mining pool to your ZClassic wallet that we started off with.

What to do with mined coins?

You can keep them in your wallet hoping to see them rise in price. If you are not planning on stockpiling any cryptocoins, you can spend or withdraw them via electronic currency exchangers, showcased on exchanger monitors, for example OKchanger.

List of Bitcoin—PayPal USD exchangers

Conclusion

Cryptocurrency mining is your unique chance to make money on the internet without much effort. Basically, all you need is powerful enough equipment (graphics cards or ASIC-devices). Just set it up the right way and then you can relax and watch how your crypto wallet balance grows relentlessly.

The future is crypto