What is mining with simple words?

The mining process of Bitcoin and many other cryptocurrencies is called mining. This is one of the cornerstones of cryptocurrencies that distinguish them from fiat and other electronic currencies. Mining cannot be compared to the usual seal of money, because it has certain functions. And the most important thing is that mining can be done by almost every person. Do you not believe it? Then read this detailed guide for beginners with theory and practical examples.

How cryptocurrency mining works

The term mining itself is English and comes from the word Mine (mining). In complex words, this process is an activity to maintain the network by closing and creating blocks in Blockchain using computational power. The miner uses the power of iron to perform special calculations to find the digital signature (hash) that closes the block. A miner who “finds” a digital signature receives a reward of 1 unit of cryptocurrency. Mining supports network operation, guarantees its protection from duplicate transactions.

In simple terms, mining is the extraction of cryptocurrency using special equipment. For Bitcoin and a number of other coins, it is the only way to increase emissions. Miners are rewarded because their activities ensure the functioning and integrity of the entire system. This is the main task of mining.

In the initial stages of mining could be engaged in by the owner of almost any computer using the power of the processor. When Satoshi Nakamoto and the company launched Bitcoin in 2009, they initially put a ceiling of 21,000,000,000 BTC into the system for maximum coin emissions. Bitcoin also recalculates the complexity of mining every 2016 blocks (about 2 weeks). These properties of the system protect the Bitcoin from inflation and are the reason why more and more powerful equipment is needed to mine new coins. All BTC coins are predicted to be produced in the middle of the 22nd century.

As early as 1-1.5 years after the appearance of Bitcoin for mining began to use powerful graphics cards that run in Crossfire or SLI mode. Then the miners managed to repel their investments in a few weeks. But the minimum requirements for a profit continued to grow. By 2012, even the most powerful CPUs (processors) had become unprofitable for mining. The era of farms – the installations connecting the powerful graphics cards, as well as ASICs – specialized mining equipment.

On the PC now it is real to mine coins like Monero, FantomCoin, DigitalNote. But even powerful PCs do not minus more than a few tens of cents a day. The situation is similar with single video cards on desktop computers.

Mining types

Mining can be classified according to shape and equipment used. Main types:

Mining on computer processors (CPUs) is an inefficient way to extract cryptocurrency. Yes, it is possible to mine coins like Monero, but even powerful personal computers will not bring any tangible income. Only relevant for those who have access to a large number of computers and free electricity.

Mining on video cards (GPU) is relevant for most cryptocopies, including ether, dash and others. Effective when using powerful graphics cards from Radeon or GeForce. In a stationary mode approaches unless for mining of cryptocurrency which cost can potentially increase in many times.

Asyc mining (ASIC) is an effective way of extracting cryptocurrencies. ASIC – processors are made with special architecture, ground for mining. Such devices have a high level of payback and are easy to maintain. The disadvantages are low liquidity in the secondary market and rapid obsolescence of the ASIC due to the growing complexity of the network.

Farms – a system that combines powerful graphics cards (GPUs). Connects to one or more computers. Shows high efficiency, with the equipment actually sold in the secondary market. The increase in the number of miners has increased demand and, as a consequence, the price of cards.

Cloud mining is the extraction of cryptocurrency from rented servers in web format. Miners pay companies money for equipment rent and remotely mine the cryptocurrency. The effectiveness of this method depends on cloud mining tariffs, the current rate, and the complexity of the network.

Browser mining – the process of extracting cryptocurrency through the execution of a special JavaScript-script. Efficiency is minimal. Many browser mining services are created for fraudulent purposes and introduce a hidden miner into users’ file systems without their knowledge.

Hidden mining – extraction of cryptocurrency with the use of foreign equipment through the spread of a special program (virus). Hidden miner is “glued” to the usual files and encrypted from antiviruses. The best assemblies of such viruses are almost impossible to remove from the computer memory or to detect antivirus software. For this variant of mining use not only other people’s PCs, but also VPS and VDS (dedicas).

Mining on phones and laptops – even the most powerful models show the minimum efficiency. For Android-mining a special program released a pool of Minergate. Earn on the android you will not be anything. With laptops the situation is similar. This is only a way to get acquainted with mining through the wai-fiy.

Mining on HDD is based on Proof-of-Capacity protocol. The more “miner” can provide disk space for mining, the higher the efficiency will be. The pioneer among the cryptocurrencies with the Proof-of-Capacity protocol is the BURST coin. To earn at least $1 a day, you need more than 500 terabytes of disk space. Bitcoin or lightcoin cannot be mined using this method.

Mining on the server is essentially the same as mining on the CPU, but with high performance. Only relevant for coins like Monero at low electricity tariffs. May have the potential in the future to add new cryptocurrencies.

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