Introduction to Cryptocurrency Mining | Homewrok @besticofinder | Steemit Crypto Academy | Week 4
Thanks to the entire SteemCryptoAcademy community to @besticofinder @steemitblog @steemcurator01 @steemcurator02 for this new opportunity to participate in one more week of crypto content.
Mining is a vast topic with many areas to cover at the level of software, hardware, computation, and mineable algorithms. This is just a small introduction to cryptocurrency mining.
Which I hope will be of help to all those who wish to enter the mining business and serve them for future research.
What is Crypto mining?
Who can be a miner?
Mining is not just about verifying transactions.
Types of Mining?
Proof of work
Proof of Stake
What is a Mining Pool?
Cloud Mining
Challenges of Mining and Mining difficulty
Advantages and Disadvantages of Mining
Can all crypto be mined?
Is it worth getting into mining in 2021?
Before any technical concept of mining, it is necessary to say that crypto mining is undoubtedly one of the most revolutionary elements of the 21st century. Simply the fact of offering the possibility to anyone of being able to be a participant in the economic system (decentralized in this case) is simply fascinating, mining validates an anonymous transaction between two parties.
In a traditional currency system the public entities; Since central banks or the FED are solely responsible for controlling money, its operation, liquidity and volume of transit is designated by these and other regulatory authorities. Which leaves us in front of a centralized system. When someone acquires assets or injects capital into their account, all this must be regulated and supervised by a single entity.
With cryptocurrencies the story is different. The blockchain network is a decentralized network in which each party performs a function. There is a member who needs an asset, another who wants to sell and another who must verify and make this transaction effective. This is where the role of the miners, it is they who verify and validate the transactions.
When a transaction is sent within the bitcoin network, before it becomes effective to the other user, it must go through a series of confirmations within the network, these confirmations are the blocks of data that the mining machines must decompress and verify to make effective the transaction.
Therefore, for mineable protocols, miners represent an indispensable figure, since they are the only ones capable of validating said transaction.
Unlike the traditional financial system, if you want to be a participant in financial transactions, you must belong to a regulatory financial institution, in addition you must have a certain degree of studies among other applications and formalities that you will need to be a member of a financial entity.
While in cryptography anyone can be a participant, a miner can be anyone. All you need is a stable internet connection, inexpensive electricity, and a mining machine. On Youtube and on the same network you will find countless tutorials on how to mine and if you wish, you do not need to really deepen your advanced computer knowledge to start mining at home. You won't need a college education financially or anything else. Only with this, you will be able to be an active member of the crypto economy.
As the title of this section says, mining is not only about verifying transactions. You can give mining another utility. If you like to invest in the crypto market, mining is also a very good option. You can buy a mining machine for $ 2000 and generate Bitcoin on a daily basis instead of buying BTC at $ 50,000. With the mining machine the BTC will cost you only what the machine cost plus the cost of electricity and internet, you will not have to buy the asset in the face of market fluctuations, after obtaining the reward all you will do is change to USDT to avoid devaluation.
Currently you can mine with hardware in two ways. The two current ways to do it are through the ASIC, the special mining machine or also called ANT Miner (there are others).
And through GPU, with video cards. That's right, if you have a computer with a 4gb AMD RX 570 card or an 8gb Nvidia 2080 Ti you can start mining your machine right away (there are more compatible models). You will also need some software like Claymore, but without much else you can start mining.
Each Mining Hardware has its advantages and disadvantages. ASIC miners are less expensive than a GPU miner since the GPU miner requires in addition to the video hardware, the other components, motherboards, processor, RAM memories etc. Whereas the ASIC miner comes with everything at once.
Coins like Monero (XMR) can be mined with fifth generation i7 processors and newer like i9. Ethereum is developing its own mining machines with a value of $ 14,000 to be sold in April of this year.
The choice of the type of mining will always depend on the intentions of the investor, the conditioning of the space and obviously the budget available for it.
Proof of Work (PoW) is one of the two ways to solve compound algorithms on the blockchain, Bitcoin uses this method. When a transaction is generated within the blockchain network, this is sent to a node where the mining machines begin to identify said node through the decoding of the blockchain.
In turn, this complex decoding of work confirms to the counterpart that the transaction is being processed, once all the confirmations are validated, the miner will receive a reward for making it effective and the transaction will be effective in the destination portfolio, which results in a new block within the blockchain.
Although decentralized mining does not raise any institution, if there is a kind of positioning within the network, the miners with the most hash power or power to mine, will be those best rewarded.
Proof of Stake is a different process than Pow that raises an alternative. In this case, there are no miners, but validators. These validators are measured by the amount of assets held.
In cases like DASH, having 1000 assets you can become a master node, which automatically makes it a validator. ETH Stake for ETH 2.0 nodes is currently available on Binance Exchange for more than two years.
When a block is created within the chain, the algorithm selects one of the validators to validate the transaction, however, despite the existence of many of them, few are assigned the task successively, thus saving much more energy compared to the proof of work.
There are protocols such as NEO that when performing Staking, the validator receives rewards for retaining said assets in his wallet. In the case of NEO, the Staking reward is GAS, another cryptocurrency.
Mining Pool is commonly called the set or conglomerate of miners who work as a team to decipher a block of data much faster. It is easier to pool the workforce than to attempt to mine individually.
If you want to start in the mining business with few equipment, it is best that you connect to a mining pool and can opt for a better performance. Being a group of people, the reward obtained is divided to all members of the pool based on their mining power.
When looking for your mining pool, the first thing is to know what algorithm you want to mine, see the fee, payment methods and commissions. And most importantly, if the software that the pool uses is compatible with its GPU or ASIC.
Some good pools for beginners and mid-range equipment such as 4gb GPU are: NiceHash and MinerStat.
Cloud mining is a different method. As its name says, you will pay for mining power to a company, which will give you a certain percentage of hashrate through which you can mine a certain algorithm.
This type of mining does not involve the same hardware and software installation procedures as GPU or ASIC mining. However, it is a bit more risky.
Like having your cryptocurrencies stored in an online wallet, mining in the cloud means that you do not have a full guarantee of your investment. So it may be preferable to have hardware and software with you and manage your computers yourself.
By becoming a miner, you face some challenges that you must meet. You must learn about mining hardware and software in order to choose the best options for your budget.
For the hardware you also need to condition your installation space. Having a good internet connection is essential. You need to create an ideal climate for your machines, as elevated temperatures will quickly deplete equipment life.
You must also have collateral capital for the maintenance of the hardware, you must understand that being machines working 24/7 it is normal for a component to break down or replace a burned part. If they are GPU Rigs, it is very important that you know about the proper maintenance of the Rigs, if you do not know, you will need someone who every 3 months, depending on the conditions, does the maintenance to your machines.
Another cost that you must cover is electricity, this rate will vary depending on the country where you are. As you must also be informed about the mining laws in your country, since you may be violating a crime without knowing it.
As well as the challenges mentioned above. The mining itself also presents something called, the mining difficulty.
This concept has to do with the fact that as the mining network and the blockchain expand, the profit of the machines decreases. In the case of Ethereum, the DAG File which is a fundamental file that must be loaded during the mining work process, at the time it weighed 4gb as the chain of blocks, miners and transactions increased, it has been expanding and currently weighs 8gb. For example, 4gb GPUs are currently facing this difficulty, so some mining software no longer allows ETH to be mined with cards of less than 8gb.
Currently the IoMiner Mining Software has a mod called zombie mode which allows downloading the fragmented DAG on 4 GB cards and being able to get a little more performance.
The main advantage that mining has, as we explained in previous paragraphs, is the fact that the cost of the cryptocurrency that you produce refers in this case to the cost of the machine and not to the market cost.
That is, if you invested $ 1500 to buy a 3 GPU rig with which you mine Ethereum. The cost of obtaining ethereum will be the cost of the machine. Unlike if you obtain Ethereum through an exchange, the cost of ETH will be subject to the cost of the market, so you must adjust to these changes.
With the machine you will always produce the same amount of ethereum. It is also important to take into account market fluctuations to protect your capital.
No, not all algorithms are capable of being mined. The most famous algorithms are Bitcoin SHA-256 (Secure Hash Algorithm) and Ethereum.
I think this is a great question for this new year. At Trading Capital we developed an article a few weeks ago talking about this topic which you can read here.
In this article he points out the importance of waiting to enter the business during this year. The Bitcoin fever and the new models of video cards released in October last year, have brought innumerable consequences to the hardware market, affecting prices in an exorbitant and even absurd way.
Old models from 4 years ago such as the AMD Rx 550 4gb with a cost of $ 90 last year, have come to exceed $ 300 again, and not only with that, all the card models of the last two generations are found sold out in each and every one of the distributors. Excessive demand for GPUs and ASICs in recent months has pushed market prices to a point where mining investment is no longer profitable.
So it is highly recommended to wait for the drop in hardware prices during this period to enter mining. If not, you are going to find yourself paying almost triple.
Being a participant in the informal economy boils down to being part of the future. Although it does not have the institutional limitations and regulations of government entities, in the same way you must educate yourself and prepare to be successful within this new language of money.
Cryptocurrencies are the financial future, there is no question about it. Above the price of Bitcoin, the simple fact of being tech money makes it vastly superior to conventional fiat money.
We will be attentive to a new installment of the SteemCryptoAcademy to bring you more information about this topic.
Source Image:
https://coin360.com/news/crypto-mining-102-algorithms
https://www.financemagnates.com/cryptocurrency/news/bitcoin-miners-in-sichuan-province-ordered-to-shut-down-in-orderly-manner/
https://www.ft.com/content/98d52c50-fd37-11e8-aebf-99e208d3e521
https://www.criptonoticias.com/mineria/granja-eeuu-compra-58000-antminers-generara-5-poder-red-bitcoin/
https://en.wikipedia.org/wiki/Proof_of_work
https://miningpools.com/
https://befast.tv/how-does-crypto-mining-work/
https://ironx.io/how-slippage-can-impact-your-crypto-trading-profits/
https://economictimes.indiatimes.com/industry/banking/finance/banking/now-that-crypto-trade-is-legal-in-india-heres-what-happens-next/articleshow/74485025.cms?from=mdr
https://www.entrepreneur.com/article/361499
https://coincasso.com/blockchain-academy/how-long-does-it-take-to-mine-a-bitcoin/attachment/bitcoin-mining-difficulty-price/
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Hello @ale.aristeguieta ,
Thank you for submitting homework task 4 ! You have done a wonderful job ! Have discussed all the topics really well and it's a complete article with lot of information. nice work [9]
Thank you