Cryptocurrencies are the new trending store of value. Beyond this, they are used for sending money anywhere around the world in a few seconds and their volatility has created a great trading opportunity that has created many millionaires around the world from investments sometimes starting from even a few hundreds of dollars.
But while there are many uses of cryptocurrencies and several ways to make money from them, few people are generating income from cryptocurrencies through mining cryptos like Bitcoin, Ethereum, and a lot more, thereby, potentially missing out on a great opportunity to make money mining cryptocurrencies even from home.
If you want to learn everything about how to mine cryptocurrencies like Bitcoin, Ethereum, Doge, Shiba Inu and much more, this article is for you.
See Also: What Is A Cryptocurrency & How Does It Work? Everything You Need To Know
What Is Cryptocurrency Mining?
Cryptocurrency mining, in its basic form, is the process by which new cryptocurrencies are generated and added into circulation. In a more advanced overview, cryptocurrency mining is how the blockchain network validates new transactions and adds them to a distributed digital ledger.
Just as is done with fiat money, when a cryptocurrency transaction happens, the ledger is automatically updated by debiting one party and crediting the other. And this process of mining is a critical component of the blockchain ledger’s maintenance and development.
The blockchain network only allows verified miners to update transactions on the digital ledger in a process called mining. And every time this is done, new cryptocurrency tokens are generated to reward the miners for their contribution to the security of the network.
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Why Should We Mine Cryptocurrencies?
Cryptocurrency miners are like auditors. Their mining activity verifies the legitimacy of a cryptocurrency transaction, and in exchange, they get rewarded with cryptocurrency tokens as payment. Without cryptocurrency mining activities, blockchain transactions would be unverified and there could be a “double-spending” issue. So cryptocurrency mining takes care of the problem, and in the process, generates revenues for the miners in the form of crypto tokens/coins.
See Also How To Start Trading Cryptocurrencies In Nigeria or Africa: The Complete Guide
How Much Does A Cryptocurrency Miner Earn?
Using bitcoin as a case study, the rewards earned from bitcoin mining reduces by half every 4 years. In the year 2009 when bitcoin mining first started, you would earn 50 BTC for each block mined. In 2012 it was around 25 BTC. in 2016 it was around 12.5 BTC and in 2020 it was around 6.25 BTC. for mining a block.
Every cryptocurrency’s mining rewards vary, but when using BTC as an example to calculate it, that’s how much a miner earns.
Is Cryptocurrency Mining Legal?
Depending on where you live around the world, cryptocurrency mining may be legal or illegal. Check your country’s local laws before you start mining cryptocurrencies.
See Also: What Is Ethereum And How Does It Work? Everything you Need To Know
Can You Mine Cryptocurrencies From Home?
Yes, you can. All you need is to purchase the cryptocurrency mining hardware and/or software, ensure you have constant electricity and can start mining the same day. IF you can’t get hardware, you can do cloud mining directly even from your mobile phone.
What Do You Need To Mine Cryptocurrencies?
To mine cryptocurrencies, you need to either get a CPU, GPU, ASIC miner or do cloud mining. These all require different types of hardware & software and their efficiency levels vary.
See Also: How To Buy Cryptocurrencies At A Huge Discount Before They Hit The Major Exchanges For The Public To Buy
How To Start Mining Cryptocurrencies
There are four ways to mine cryptocurrencies. They are:
1). CPU Miner:
CPU mining involves the use of the Central Processing Unit of a desktop computer to carry out the mining activity. It used to be the popular method of mining cryptocurrencies in the past, but not anymore because CPU mining is extremely slow and can go on for months without any reasonable returns.
You can also mine with a laptop computer but it is highly advised against because the laptop computer will likely overheat and fry within a few hours.
2). GPU Miner:
GPU mining is the most popular method of mining cryptocurrencies. It is highly efficient and cheap overall and is done by setting up GPU rigs—although GPU rigs themselves are expensive to purchase. Even cloud mining platforms carry out cloud mining activities using hundreds, thousands, or even hundreds of thousands of GPU rigs.
GPU stands for Graphic Processing Unit and uses graphics cards to mine cryptocurrencies.
3). ASIC Miner:
ASIC, also called Application-Specific Integrated Circuits are devices created for exclusively one purpose: to mine cryptocurrencies. They mine far more cryptocurrencies than GPU and CPU miners combined, making those two unable to keep up with the harsh rate and earnings. But this created a controversy with the unfair mining advantage, and as such, fewer ASIC miners are available for mining cryptos now.
4). Cloud mining:
Cloud mining is the most popular method of mining cryptocurrencies. Here the cloud miner is renting rigs owned by a cloud mining platform for a period of time at a fixed cost and these mining platforms can sometimes own hundreds of thousands of rigs.
Cloud mining helps everyone participate in mining cryptocurrencies without having to invest so much money in purchasing a mining rig and there can be free and paid mining plans, although the free plans are usually slow and unlikely to produce positive results.
See Also: How To Do Research On A Cryptocurrency Coin Or Token Before Investing
What Is A Mining Pool?
Since mining a block on the blockchain network can be very difficult, cryptocurrency miners can sometimes join a mining pool, so they can combine their computing power together to increase their chances of finding and mining a block(s) on the blockchain network. When they do this successfully, the cryptocurrency reward they get is shared evenly amongst every miner in the pool based on the amount of computing power they contributed.
While most cryptocurrency mining applications come with a mining pool, cryptocurrency miners can also join a pool via the internet and can change pools whenever they like because some pools can pay more than others.
Can You Mine Cryptocurrencies On Your Phone?
You can mine cryptocurrencies from your mobile phone by subscribing to a cloud mining service.
What Cryptocurrencies Are Profitable To Mine?
Cryptocurrencies are highly volatile and while it may look like they could be very profitable today and unprofitable the next day, it is best to only mine cryptocurrencies that have a well-established use case.
See Also: Types of Cryptocurrencies To Invest In And Their Use Cases in Nigeria, Africa, or Anywhere Around The World
Disadvantages of Cryptocurrency Mining
While there’s a great upside to cryptocurrency mining, here are some downsides to it:
- Regulatory & legal requirements might change country-to-country sometimes and it could suddenly become illegal to mine cryptocurrencies or expensive due to the tax payments required by the government.
- Unstable or high electricity costs can hinder cryptocurrency mining activities
To Sum It Up
Cryptocurrency mining is a great way to make money from cryptocurrencies while contributing to the security and growth of the blockchain network itself. While there are several ways to mine cryptocurrencies, it is important you choose what works best for you in terms of your time, money, and effort. By being realistic with your plans, you can set up yourself to better succeed as a cryptocurrency miner first through focusing your strengths on what platforms or geographical regions do not just help you mine better, but also provide you with the legal, regulatory, and infrastructural (e.g constant electricity) framework to thrive as a cryptocurrency miner.
See Also: What Is Blockchain Technology & How Does It Work? Everything You Need To Know
I’ve always wanted to mine cryptocurrency and I’m working on how to build a software for that purpose.
Nice and interesting post though, thanks.
Thank you for the contribution, Tamunosaki
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