The era of cryptocurrencies began in 2009 with the introduction of Bitcoin — the brainchild of Satoshi Nakamoto, whose identity has not yet been revealed. Digital market activity, rising prices and success stories of thousands of people are creating interest in this field. People are asking more and more about cryptocurrency mining — how to start, what equipment is needed, and whether if it’s worth it. The guide for the beginners, which will help you understand all the difficulties related to cryptocurrency mining, is presented below.
Methods and types of cryptocurrency mining
The first step of the newly made miner is to decide on the method of cryptocurrency mining. There are two of them:
- Buy equipment and start receiving digital coins on your own or using a mining pool.
- Buy power on a cloud mining service and start mining.
The first method is more suitable for experienced miners who understand the essence of cryptocurrency mining, are able to make calculations and have the means to buy equipment. Often, the initial cost of collecting a farm or buying an ASIC reaches up to $2,000 or more. Cloud services are suitable for beginners and miners who do not want to spend money on the purchase of equipment and the time to set it up. Both options will be discussed in more detail below.
Decide on equipment for the extraction of digital coins, because with the increasing complexity of cryptocurrency mining, the requirements for the equipment also increase.
Let’s outline the main methods:
- Using a CPU. This type of mining was effective during the formation of Bitcoin when the complexity of its mining made it possible to receive digital money on low-performance equipment. Since 2012, this method has lost relevance, and today it is not applied at all.
- Using a GPU. The use of GPU is relevant for obtaining new digital coins that are only issued and do not require a high hash rate. As for popular cryptocurrencies, such as Bitcoin, Dash, Litecoin, and others, the simultaneous use of several GPUs (5 or more) is required. Before buying equipment, you need to make calculations to determine the payback.
- Using ASIC miners. We are talking about special equipment created for the extraction of digital coins. This is a small block that has a high hash rate and provides the mining of different coins (depending on the type), including Bitcoin. The main disadvantages are the complexity of repairing and the high price.
There are also other mining methods – RAM or FPGA, but they are irrelevant and have not been used for a long time.
These methods are relevant for individual mining when the miner collects the farm themselves, spends their money and time on equipment. In the future, they can work independently, taking income for themselves, or connect to the pool. The second option is more effective, because it allows you to mine cryptocurrencies with any complexity, and then to split the profit between the miners. Profit is split taking into account the given power or by another principle (depends on the type of pool).
The so-called cloud mining services are an alternative to solo mining. The companies are professionally engaged in cryptocurrency mining on their own equipment. Their specialists buy equipment and configure it, and lease capacities out to buyers. The general algorithm is as follows:
- Choose a cloud mining service;
- Choose a cryptocurrency and tariff;
- Start mining and earn money.
Purchasing, maintaining and repairing is a problem of cloud mining service representatives. The task of the miner is to pay for the selected tariff and make a profit. The advantages of such companies are the legality of work, the absence of problems with paying taxes, and the possibility of saving on electricity and the extraction of several cryptocurrencies at once. The disadvantages include only the risks of digital coin depreciation and falling into the hands of scammers.
How to choose a cryptocurrency
The desire to start mining often comes down to the choice of cryptocurrency. Beginners often do not know which coin to choose. Let’s highlight several options:
- Popular cryptocurrencies. This category includes Bitcoin, Ethereum, XRP, Tether, and others. They are the TOP-5 by market capitalization and are in the greatest demand in the market. The upward trend is attracting investors and miners, but the main drawback is the high mining difficulty. For example, to mine Bitcoin, you will have to buy one or more ASICs or rent at least one TH/s on a cloud mining service.
- Mid-level coins (Decred, Qtum, Zcash, and others). In order to save money, you can choose the coins included in the TOP-50. They have low mining difficulty and are successfully mined using GPUs or Asics. When mining on a cloud service, you can buy a low hash rate and enjoy mining coins to your account. The risk lies in a possible fall in prices, but such danger is typical for all cryptocurrencies.
- Cryptocurrency after ICO. Some miners pay attention to digital coins at the stage of their formation. Such coins require minimal investment in the purchase of equipment. On the other hand, there are risks associated with probable depreciation.
In the absence of experience, it is better to start with mid-level cryptocurrencies or popular digital coins (if you have the necessary funds). As for the mining of new digital money, it bears fruit if you make diversification of the risks and invest in several options at the same time.
When considering how to start mining, we almost missed one of the main stages — the creation of a cryptocurrency wallet. It is useful for storing earned coins and securing them. The choice of miners is as follows:
- Desktop wallets are programs that are installed on a PC or laptop. They can be for a specific cryptocurrency or multicurrency. They are easy to use and guarantee a high level of protection, as well as have high functionality. The disadvantage is the need for installation. Popular options are Exodus, Electrum, Jaxx.
- Crypto Mobile Wallets are applications that are installed and used on smartphones. The advantages are the availability of the wallet and the possibility of its use at any time. The best options are BitGo, Copay, Blockchain, and others. The disadvantage is a low level of protection.
- Online Wallets do not require installation. Money is stored on a special web platform. They are convenient to use and have reliable protection, but the owner of the cryptocurrency depends on the service and the reliability of its owner. There are plenty of cases where such services were attacked by hackers and customers lost their money. Popular online wallets are Holy, Blockchain.info, Lumi and others.
- Hardware Wallets are special devices created for storing digital coins. They are compact and guarantee reliable protection of digital money. They do not require an Internet connection, so hackers cannot get access to the money. The disadvantage is the high price and possible difficulties with restoring access in case of loss. Popular options are Trezor, Xapo, etc.
There are also Paper Wallets, which are a sheet of paper with a private graphical or ordinary key on it. The document can be stored in a safe place and you can use the data if necessary (for funding and transferring money). The advantage of such wallets is the safety of funds, but in case of loss, you can lose access to your money.
How to start
The actions of a miner planning to mine digital money depend on the chosen method.
- Choose a cryptocurrency;
- Choose a wallet;
- Buy and configure equipment;
- Select a pool;
- Install the program for the extraction of coins.
Cloud mining service:
- Choose a cloud mining service;
- Choose a cryptocurrency;
- Install a wallet;
- Purchase the necessary tariff plan.
This is a short instruction for beginners, which conveys only a general algorithm of action. The mining process requires deep study and calculation.
At the current stage, cryptocurrency mining no longer brings a high profit, as previously. To get a stable income, you will have to spend money on the purchase of equipment or the hash power on a cloud mining service. At the same time, the profitability of coin mining depends on many factors — the market price, equipment, electricity tariffs, pool commission fees and even equipment setup. Previously, the payback period was no more than 2-3 months, but today you need about 1-1.5 years. That is why you should not count on quick money, but you also should not give up the idea of getting a stable income. The main thing is to responsibly approach the process and make the necessary calculations.