Almost everyone has heard of the cryptocurrency mining, but most people don’t know what exactly it is, how it works, the things required to mine cryptocurrency and more interesting facts. One of the most interesting facts about cryptocurrency mining is that it is not under the regulation of a governing entity or any other third party, so there is a full control given to every miner to validate and authorize transactions.
Mentioned below are 10 things you didn’t know about cryptocurrency mining yet and you must know them if you want to explore the cryptocurrency mining world in the long-run.
What Is Cryptocurrency Mining?
Cryptocurrency mining is executed through the methods of verification and validation of transactions over the Blockchain network. It consists of two functions viz., adding a block of transactions and releasing new electronic currency. The more hash rate (the speed at which the computing work is completed) indicates the higher chance of finding the correct nonce, which is the 32-bit arbitrary number of transactions sent from a given address. The first miner who finds the nonce will add a new block of the transaction in the Blockchain network and will be rewarded with a huge amount of new cryptocurrency in the form of digital token that’s being validated. It uses cryptography method in order to ensure that the transaction data should be secure, accurate and tamper-proof. Some of the cryptocurrencies to mine are Bitcoin (BTC), Ethereum (ETH), ZenCash (ZEN), Aeon (AEON), Feathercoin (FTC), Litecoin (LTC), Monero (XMR) and Vertcoin (VTC).
Bitcoin Mining Is A Big Business
Most large operators mine Bitcoin with low electricity costs and low temperature across the globe. Although Bitcoin mining is a big business, a profit through the business is difficult because it depends on a lot of factors like hash rate, bitcoin reward per block, mining difficulty, electricity cost, power consumption, pool fees, bitcoin price and difficulty increase per year. Some of the mining companies who are trying to control Bitcoin are 21 Inc. and KnCMiner. Stockholm-based KnCMiner had decided to grow their business with a 20 MW datacenter. The data center is a computing facility repository used for both cloud services and hosting of dedicated Bitcoin mining hardware to the global client base. Bitcoin mining giant Bitfury is using the two-phase immersion cooling 2PIC technology in order to lower its operational costs and run ASICs in an efficient way. Bitcoin mining calculators help you to calculate profitability or number of bitcoins can be generated based upon specific Bitcoin mining hardware. Some of the calculators are CoinWarz, CryptoCompare, and WhatToMine.
How Cryptocurrency Mining Works
When a person sends a digital currency or any other digital asset to another person’s account, then a new block of a transaction will be created. Miners are supposed to verify and validate the block of the transaction within a short span of time by using dedicated mining hardware and software. Then, they have to compute a cryptographic hash function in order to secure the transaction data against malware activities like spyware, trojan horse, phishing and other computer viruses. Once the block is accepted by 51% consensus using the Proof-of-work (PoW), then the block will be added to the Blockchain network. The first miner to mine the block will be rewarded with the transaction fee. Block rewards for each mineable cryptocurrency are different and Bitcoin mining block reward is 12.5 BTC.
Cryptographic Hash Function
A cryptographic hash function is a complex algorithm which takes an input of arbitrary length and produces an output of fixed-size alphanumeric string called a checksum, message digest or hash value. It is basically used to verify the authenticity of transaction data. The four ideal properties of Cryptographic Hash Function are deterministic, speedy, infeasible and adaptable. Deterministic means the same input should be the result in the same hash value. Speedy defines that it is fast to calculate the hash value for any type of input. Infeasible means that it is difficult to find two different outputs with the same hash value. Adaptable defines that it easily accepts the new changes in the previously given-input and produces the new result accordingly and the new hash value should not be correlated with the old hash value.
Consensus is defined as a general agreement on transactions to be achieved on the Blockchain. Protocol is a set of rules designed for the formation, transmission and operation of information carried out by the network devices. Consensus protocols are basically what synchronize all the nodes on a network while solving the given complex mathematical challenge. Some of the consensus protocols are Proof-of-Work (PoW) and Proof-of-Stack (PoS). PoW is the most widely used consensus protocol which states that the crypto miners have to compete with each other to find the solution, and the first miner to validate the transaction and create a new block will receive a reward. PoS states that if a validator has 1% of a digital currency, then he will have the chance to mine only 1% of all its transactions and PoS will randomly pick up any of the validators based upon their stakes value to create a new block and will be rewarded. Some altcoins use PoW and PoS are Komodo (KMD), Dash (DASH) and BridgeCoin (BCO).
Things To Mine Cryptocurrency
Things required to mine cryptocurrency are cryptocurrency wallet, mining software, mining pool membership, cryptocurrency exchange account, full-time internet connection, Hardware Setup Location, Custom-built computer and Graphics Processing Unit (GPU) or Application-specific Integrated Circuit (ASIC) Chip. Cryptocurrency wallet contains private and public keys which are used to store, send and receive digital currency. The purpose of mining software is to deliver works to the crypto miners and receive the completed work from them, like CGMiner and EasyMiner. A cryptocurrency exchange is a platform that connects buyers and sellers and allows them to trade digital currency. An uninterrupted highest speed internet and Hardware Setup location in air-conditioned space are required. Custom-built computer states that a specialized computer is ideal for mining. Mining pool membership is needed to join a community of crypto miners. GPU can perform more calculations and give improved output and ASIC is designed to improve speed and use less electricity. A strong appetite is also required for reading and learning owing to constant technology changes and new techniques.
Crypto Mining Malware
Crypto mining malware refers to malicious software program designed to take over the processing power of computers, smartphones, tablets and other electronic devices without a user’s consent for cryptocurrency mining. The user either gets affected unknowingly by visiting any of the websites which run the program stealthily or is directed into downloading the program via email attachments. In most cases, the program can heat the phone’s battery and physically damage devices. Due to the increasing value of Bitcoin and other cryptocurrencies, crypto mining malware became more powerful in 2017 and some of the affected countries are the United States, Japan, Australia, Taiwan and India. WannaMine worm is one of the crypto mining malware used “EternalBlue” and two windows like PowerShell and WMI to execute commands on a targeted computer system. The malware was specially designed to mine Monero. It was invaded into a victim’s computer and used to run a complex mathematical equation to generate a new Monero. The new currency was added to the digital wallet of the hacker.
Types Of Cryptocurrency Mining
Although cryptocurrency mining is painstaking and expensive, but it offers an ample profit. There are three types of cryptocurrency mining viz., Solo Mining, Pool Mining and Cloud Mining. In Solo mining, the miner connects their own software wallet to the Blockchain network and performs the mining task without any helping hand and the miner will be credited with the complete Block reward. PeerCoin (PPC) and DogeCoin (DOGE) are the best altcoins for Solo Mining. In Pool mining, a group of miners come together and share their processing power over the network in order to find the solution for the complex mathematical equation. The amount of work will be distributed equally and reward will be split accordingly. Ravencoin (RVN) and Electroneum (ETN) are the best altcoins for pool mining. In Cloud mining, the user mines cryptocurrency without managing the hardware. The cloud mining is just provided as a service, where the miner just needs to register and purchase mining contracts or shares. Bitcoin (BTC) and Ethereum (ETH) are the best cryptocurrencies for Cloud Mining.
High Electricity Consumption
Cryptocurrency mining requires tons of electricity which makes it very expensive. Due to its high electricity consumption, most cryptocurrency mining is done in cheap electricity places like China and Russia. If Bitcoin mining was a country, then it would have in 61th position in the world because it has consumed more electricity than 159 countries as of 2017. As of February 22, 2018, Ethereum’s annual electricity consumption was a third of Bitcoin and Litecoin’s annual energy consumption was about half of Bitcoin, according to Solar Magazine. As of August 28, 2018, the electricity consumption of Monero (XMR) mining was 912,000 kWh per day or 332 million kWh per year and Bitcoin Cash (BCH) was 11.77 million kWh per day or 4.30 billion kWh per year, according to Bitcoin Exchange Guide. In order to estimate the total electricity consumption of any network, calculate the total mining revenues and convert into USD. Determine the part of the mining revenues which is spent on electricity costs. Convert the resulting number into Kilowatt-hours and divide it by the average price per kilowatt-hour.
A pre-mined cryptocurrency means a cryptocurrency which has already been mined at its early stage. Pre-mining is done due to unfair practices of the developers or the cryptocurrency exchange and for the further development of the coin. However, the biggest benefit of the pre-mining goes to those people who are already involved with the particular cryptocurrency right from the beginning. Some of the pre-mined cryptocurrencies are Stellar Lumens (XLM), Ripple (XRP), Cardano (ADA), EOS.IO (EOS) and NEO (NEO). Stellar is an open-source and decentralized network which runs cryptocurrency called Stellar Lumens (XLM) and supports cross-border transactions. Ripple is typically a real-time gross settlement system which has its own network called RippleNet and cryptocurrency called XRP. Cardano is an open-source and decentralized platform that runs cryptocurrency called ADA. EOS is an operating system which is the blockchain-based decentralized platform that supports commercial decentralized applications and has its own token known as EOS. NEO is a blockchain-based platform which runs NEO tokens that are 100% pre-mined and built on a proof-of-stack algorithm.