Before we get into the details of what you should know before starting cryptocurrency mining, we need to ask ourselves what cryptocurrency is in the first place.
Cryptocurrency is electric money which is not particular to any nation and is not produced by any government-controlled bank. In short, cryptocurrency can also be referred to as digital currencies. This currency is based on cryptography. They are produced with the help of a mathematical process that ensures that the currency does not lose its value as a result of extensive circulation.
This is done using a powerful machine that is equipped to solve these mathematical problems. The process of creating and transacting cryptocurrency is what is called mining, and those who do it are called miners. When the mathematical problems are solved, it is now referred to as a block.
These blocks need verification by other users to get added to what is known as a Blockchain. When the currency is created, it is then recorded in the network (blockchain), thereby announcing its existence.
Things that you should know before you start mining
There are many other types of cryptocurrency. Most people are not aware that there are different types of cryptocurrency other than Bitcoin. Being familiar with other digital currency is the first step you need to undertake to identify which is the right one to invest in. Some of the different types of cryptocurrency include; Litecoin, Ethereum, Zcash, Dash, Ripple, and Monero. The bottom line is that Bitcoin continues to be in the lead, regarding popularity, market capitalization and user base. However, Ethereum and Ripple are becoming more popular since they are the best cost-benefit for beginners.
The laundry list. In essence, the laundry list are the things that you will need to mine crypto coins. Mining of cryptocurrency is not easy, and there are many things that you require including;
- A coin wallet – which is a free private database that stores your earnings and records your transactions. It is usually password protected.
- A mining software packaged comprised of both stratum and cgminer.
- Mining pool membership- it is an online community of miners who by combining their computers increase their income stability and earnings.
- Membership in a currency exchange program to convert cash into virtual coins and vice versa.
- A dependable internet connection
- A hardware setup. It should be located in an air-conditioned space.
- A computer that is custom designed for mining. It is recommended that you do not use a handheld device, a laptop or a gaming console since they are not useful in generating income.
- An ASIC chip which is a specialized processing device or an ATI graphics processing unit (GPU). The two are used for mining work and accounting services and the price ranges from $90 used to $3000 new. You can find the list of the best ASIC miners here.
- Since mining generates a lot of heat, you will need a house fun to cool down the hardware.
- Personal curiosity. You will need to be committed entirely and have a strong appetite for reading to keep in touch with new technologies.
Electricity. Mining takes up a lot of electricity. Unless you have a free electric connection, the cost of electricity will always come into play while doing cryptocurrency mining. To calculate the return on investment of the machines, you must divide the execution performance by the amount of electricity consumed in watts. For large mining facilities, this is not a problem since they have found ways of offsetting this cost by using different types of electric resources such as geothermal and hydropower.
Device cost. The cost of the devices varies from $500 to $2000 depending on the condition of the machine and the performance. You need to ask yourself whether you will be able to earn enough money to pay off the cost of the device and whether or not it is profitable enough.
In conclusion Litecoins, Dogecoins, Ripple and Ethereum are becoming more popular since they are still within reach of consumer-level users with low budgets. It is however vital for you to stay out of bitcoin mining unless you are a large-scale operative. This is because, over the years, the difficulty in solving bitcoin mathematical problems is far beyond the reach of a regular miner doing it from home.