Earnings from cryptocurrency mining

• At a high level, how mining works

• Home-based mining is no longer cost-effective.

• What is a mining pool and how do I join one？

• More profitable coins to mine Bitcoin

Mining is the process of confirming new transactions and adding them to the existing historical - blockchain - record by creating new blocks. Because the process is energy expensive, miners are compensated with newly produced cryptocurrency in exchange for their efforts. So, how easy is it to make money mining cryptocurrency？

What is Bitcoin Mining？

Bitcoin mining is the process of creating new bitcoins and adding them to the total supply, which has a set maximum of 21 million bitcoins and is projected to reach that level in the year 2140.

The first block, known as the Genesis block, was mined on January 3rd, 2009, and a new block has been added to the network every 10 minutes since then.

A reward is given to the miner who publishes a block to the network, which is presently 6.25 BTC. Given bitcoin's high worth, it's no wonder that the race to be the first to discover the next block and earn the prize is fierce.

Miners must utilize their computer capacity to solve a challenging mathematical problem in order to earn the right to broadcast the next block to the network and confirm the transactions contained within it.

Because miners must verify that they have done the computational labor required to determine the correct answer, Bitcoin is known as a Proof of Work (PoW) cryptocurrency.

While the calculation itself is worthless, the work required to get there is: it confirms that the miner did not cheat, and it assures that no single entity can discover all of the blocks and keep all of the bitcoin rewards for itself.

Consider it like a lottery, where increasing computer power is equivalent to purchasing more tickets.

Your odds of winning - that is, discovering the proper solution - improve, but so does your electrical bill. The rewards earned from successfully mined blocks must be larger than the cost of energy required in the process to be a viable miner.

Miners also get paid transaction fees for the blocks they try to add to the blockchain, but these are insignificant in comparison to the 6.5 BTC payout.

The BTC given to the miner who confirms each new block is referred to as the “coinbase reward” — a phrase later adopted by the same-named cryptocurrency exchange.

Bitcoin could be mined using the GPU in a standard home computer in the early days.

Miners today must rely on specialized hardware called application-specific integrated circuits, or ASICs. These are computer processors that have been specifically designed to address the arithmetic issue at the heart of bitcoin mining.

How does one mine bitcoin？

Solo mining – that is, trying to find new Bitcoin blocks with your own GPUs or ASICs – is no longer profitable. Even with numerous ASICs linked together, it's possible to work for weeks, months, or even years without finding a new block. Meanwhile, because these devices are power-hungry, you'll be racking up a high electric bill.

Bitcoiners have built mining pools to tackle this problem and make mining more accessible to as many people as possible.

This involves a group of miners pooling their hashpower (combined computer processing power) to look for a new block.

If any miner in the pool completes this quest, the coinbase reward will be distributed evenly to each pool member's hashpower.

For example, if you provide 5% of your hash power to the pool and the pool discovers a new block, you will receive 5% of the reward, which is 0.3125 BTC (minus pool fees).

It may appear to be simple money, but if it were, everyone would be doing it! The truth is that making money from bitcoin mining is exceedingly difficult.

Any benefits you may get from the pool can be devoured by overheads if you include in your hardware and electricity expenditures. As a result, the majority of bitcoin mining facilities are located near renewable energy sources in areas where electricity is inexpensive and plentiful.

You won't be able to mine bitcoin profitably unless you have your own hydroelectric dam or a bank of solar panels. That's not to say you can't do it using national grid power, but you'll need to optimize your setup to guarantee your ASICs are working as effectively as possible.

Professional miners overclock their equipment to achieve performance levels that are higher than the manufacturer's recommendations.

This should only be tried by experienced miners, as care must be taken not to overheat the miners in the process, as correcting one problem can result in the need to cool your mining operation, which will consume even more energy.

If you're serious about mining bitcoin, you'll need to choose the correct ASIC for your demands and budget, as well as the right site to put up a rig (cold, well vented, and well insulated or separated to avoid noise complaints). After you've completed that and received your mining equipment, it'll be time to decide which mining pool to join.

The process of selecting a bitcoin mining pool

Choosing a mining pool boils down to a simple equation: the larger the pool's hashpower, the more frequently they'll find blocks. This will assure a steady flow of income.

However, because you will only contribute a modest amount of hashpower to the pool, your share of the coinbase payouts will be insignificant. You'll get a bigger percentage of the prizes if you join a smaller pool, but payouts will be less frequent because the pool will find fewer blocks.

There are a few more technical factors that will influence your decision. If you want to do it yourself, you'll need a fast internet connection with minimal latency for pinging the pool and sharing data.

Any time spent looking for a solution to the next block can be wasted if data is delayed. A ping of less than 200ms and as near to zero as possible is preferable.

Different pools charge different costs, so this must be considered as well. Check the payout frequency as well; some pools will only pay out on specific dates or after a certain quantity of BTC has been accumulated in your wallet.

Because you're relying on them not to get hacked or hold onto funds, pools that keep the miners' rewards until they're delivered are similarly at danger. It's possible that you'd like to join a pool that pays out directly to your bank account.

The opportunity cost of investing in a mining pool should be your final decision. Is it possible to receive a similar or better rate of return on your investment elsewhere, when risk is taken into account？

The Benefits of Using A Mining Hosting Service

Using a provider that hosts a mining rig for you might be a better option. The machine and electricity are your responsibility, but everything else is taken care of. You may use a dashboard to track your ROI and even figure out when you'll break even. Here's an illustration from Compass Mining.

The procedure for using a Bitcoin Mining Hosting Service in a nutshell (referencing the tweet above).

· Purchase a mining rig for $9,000 (notice that they are in low supply).

· Choose where your Miner will be housed and pay for the electricity - in this case, $250 per month.

· Connect to a Pool to track block reward and transaction fee money, and create a wallet to collect them.

Selecting the Most Profitable Cryptocurrency to Mine

Despite the fact that we've concentrated on Bitcoin so far, there are hundreds of cryptocurrencies that follow a Proof of Work consensus process and can thus be mined.

You may use comparison tools like WhatToMine to figure out which coin is the most profitable based on your hashpower, ASIC type, and other parameters like network difficulty and market price.

Because Bitcoin is the most valued cryptocurrency and hence the most desired, its hashrate is many times higher than any other PoW cryptocurrency. Mining an alternative cryptocurrency like Monero, Bitcoin Cash, or Ethereum Classic may allow you to discover more blocks and hence earn greater rewards.

You're not obligated to mine any one cryptocurrency because the profitability of each PoW coin might fluctuate; with practice, you can learn to switch from one to another to maximize your profits.

You want to see a return on your investment, just like you would with any other. You can receive mining rewards of an asset that may greatly appreciate if the cryptocurrency is inexpensive or just starting started. So that's the first thing you should do.

Is it worthwhile to mine cryptocurrency？

Cryptocurrency mining can be satisfying if you're a tech nerd who enjoys getting your hands dirty and learning more about how things function. Building your own bitcoin mining setup will teach you more about cryptocurrency than hundreds of hours of tutorials and textbooks.

Mining, then, could be worth investigating from a knowledge standpoint. If you're only wanting to mine for a passive income and aren't interested in the technical challenge, you're going to struggle.

Mining is hardly viable for the typical user, and it necessitates continuous monitoring and maintenance, which is why it has mostly been commoditized by professional firms that can take advantage of economies of scale.

Use an online comparison tool to enter your electricity costs and recommended hardware if you're unclear whether mining would be viable. This will give you an indication of how much money you could be able to make. Only then will you be able to determine whether or not mining for cryptocurrency is a viable option for you.