The Washington Independent
The Washington Independent
Learning the Basics of Mining

Learning the Basics of Mining

Last updated: February 17, 2021 | April 30, 2018 | Mariella Blankenship
financecrypto

Table of Contents

What is a block?Other Terms That You Should KnowDifferent Kinds of Mining

Mining is a process of verifying transactions and publishing them to a public ledger known as a blockchain. Mining varies across Bitcoin and other altcoins like Ethereum and Monero. At a basic level, mining is the computation power to carry out the processing and verification of transactions in a blockchain.

Most PCs, Laptops have the capability to mine cryptocurrencies, however, the amount of coins these devices can mine is typically lower than that of higher-end computational devices such as graphics cards and ASIC miners. Mining involves compiling transactions together into “blocks” which miners then try to solve complex puzzles. The miner who first solves the puzzle receives an associate reward for the puzzle.

What is a block?

A block is a group of transactions which when grouped together form a block. Some altcoins use dummy or fake transactions in a block to remove the traceability of the transactions. Transactions at a minimum contain sender and receiver wallets, amounts, timestamps. Blocks typically have a corresponding reward and difficulty associated with mining that block. The rewards for most blocks for different cryptocurrencies go down over time.

Block time is quite an easy one, it is the length of time in which a new block is created. If the block time for an altcoin is 2 minutes then that means the next block creates two minutes from the previous being solved.

The block reward is the reward miners receive for successfully mining a block. This typically decreases over time by halving every x number of blocks however this varies for different coins.

Other Terms That You Should Know

Mining Difficulty

Mining difficulty is a vital part of mining, and it effectively determines the rate of supply of new coins. As mining difficulty increases it becomes harder to mine that coin as more complex calculations are required. If there are advances in mining a coin from CPU to GPU for from GPU to ASICs this will inevitably drive up the difficulty. Bitcoin for example is now unprofitable to mine with GPUs as the difficulty has increased exponentially due to the rise of ASIC miners.

Wallet

A wallet is a storage place for cryptocurrencies. Wallets typically have public and private keys however exchange. Never share your private keys! You only own a wallet if you have a private key! Wallets can be online or offline (not connected to the internet). You’ll need a wallet if you plan on mining as this will be the destination to store all the cryptocurrency you mine.

Exchange

An exchange is somewhere that you can turn your sweet crypto you mined into a FIAT currency such as USD or EUR or use it to buy some other altcoin. Some exchanges such as coin base, only facilitate FIAT currency to a selection of cryptocurrencies i.e BTC to EUR, other exchanges such as Poloniex only facilitate cryptocurrencies to other cryptocurrencies such as BTC to ETH. You should select the appropriate exchanges for you to create accounts on depending on the coins you plan on mining.

Mining Pool

A mining pool is a group of miners who work together combining their computational power for the sharing of block rewards. Mining pools are much more common than solo mining and typically are more reliable and consistent in terms of continuous revenue. Mining pools typically also charge a fee for the maintenance of the pool and keeping the pool secure. Mining pools typically have a payment threshold that needs to be achieved before a user can withdraw their mined cryptocurrency.

Different Kinds of Mining

CPU, GPU & ASIC mining

In essence, they do the same thing however they are all different pieces of hardware, suited to doing different things. CPU mining is limited to altcoins which allow it and typically are unprofitable. GPU mining is very popular as it is relatively cheap and diverse with prices of GPUs averaging out similarly over time. GPU mining is diverse enough to mine most coins with the exception of those which can be mined only by CPU and ASIC. ASIC mining is a dedicated device designed for the sole purpose of mining a particular coin or algorithm. Although originally designed for Bitcoin, ASICs have recently been designed for Monero and Ethereum.

Solo Mining

Solo mining is when a miner attempts to mine an entire block by themselves and thus receiving all of a block reward. Due to the size of networks these days it is extremely unpopular for miners to solo mine as it is effectively pure luck for a miner to find and mine a block first. It is much more common for miners to mine as part of a mining pool.

Mariella Blankenship | Mariella is an SEO writer who helps companies improve their Google search rankings. Her work has appeared in a variety of e-zine publications. She writes articles for site-reference newletter.com on a daily basis about SEO techniques. Her articles strive to strike a balance between being insightful and meeting SEO requirements–but never at the cost of being enjoyable to read.

Related

Best Value Stock

Growth equity valuations are at an all-time peak, prompting some buyers worried about the effects of inflation and increasing interest rates to shift to value stocks, which provide a higher level of protection.

4 Ways to Stop Your Car Becoming a Money-Drain

An old car does not always mean a cool, classic car. In most cases, it means a banged-up old wagon that can barely make it up the slightest incline. But if it’s all you have, what can you do?

4 Ways to Stop Your Car Becoming a Money-Drain

7 Ways to Make Money on Instagram

Instagram is one of the world’s best online marketing platforms, with over 100 million users worldwide. From influencers and creators to various brands and companies, everyone uses Instagram to share their passion through photos and videos.

7 Ways to Make Money on Instagram

The 50-year history of just in time manufacturing comes to an end

Priced out of creativity, because of the hyperproductive supply chain pioneered by Toyota is now under attack

The 50-year history of just in time manufacturing comes to an end

Bespoke Tranche Opportunities

A bespoke tranche opportunities, formerly known as bespoke CDO, is a structured financial product, which is specifically a collateralized debt obligation (CDO).

Bespoke Tranche Opportunities

Best cryptocurrency to invest in 2021

Investing in crypto has never been this convenient. Now that the internet is so powerful, everything else can be done in a click.

Best cryptocurrency to invest in 2021

Are NFTs Worth Your Money?

A virtual artwork has sold for an eye-watering $69 million (£50 million) at Christie's auction site, but the buyer will not receive a statue, painting, or maybe even a print. Instead, they receive an NFT, which is a one-of-a-kind digital token.

Are NFTs Worth Your Money?

Is it still difficult for you to understand the definition of digital currency? Central bankers are left-leaning

In terms of China's digital currency, the US Federal Reserve is right beside you.

Is it still difficult for you to understand the definition of digital currency? Central bankers are left-leaning

Types of financial statements

Financial statements are written documents that describe a company's operations and financial performance. Government departments, accountants, companies, and others often inspect financial statements to ensure consistency and for accounting, funding, and investment purposes.

Types of financial statements

Types of Mortgage Loans

A mortgage is a loan used to purchase real estate or property. The majority of contracts are for 25 years, but they can be shorter or longer.

Types of Mortgage Loans

Even when Warren Buffett is no longer in charge, Abel will finally assume the role of CEO of Berkshire Hathaway

Most people didn't plan to learn much from the Berkshire Hathaway annual meeting, but did get a reward: Who will be the next chief executive officer?

Even when Warren Buffett is no longer in charge, Abel will finally assume the role of CEO of Berkshire Hathaway

© Copyright 2021 The Washington Independent All Rights Reserved

Terms & Privacy | twi.news@washingtonindependent.com