Cryptocurrency Mining: How to Get Paid in Bitcoin and Ethereum
In the world of cryptocurrency, mining refers to the process by which transactions are verified and added to the public ledger (the blockchain). In return, miners are rewarded with cryptocurrencies such as Bitcoin and Ethereum. However, this isn’t just a way to get rich quickly — many people have made significant sums of money by investing in cryptocurrency mining hardware and GPUs, then using them to mine digital coins in bulk and selling them on sites like Coinbase at much higher prices than they originally paid. If you’re interested in getting into this line of work, here’s what you need to know about getting started in cryptocurrency mining.
Cryptocurrencies 101
Before you start mining for cryptocurrency, it’s important to have a firm grasp of how blockchain technology works. In basic terms, each cryptocurrency runs on its own blockchain. Each new transaction uses up a block of data on that chain, and those blocks need to be mined using specialized software. Miners—those who use their computers (and, usually, powerful graphics cards) to mine for cryptocurrency—are compensated with coins or tokens from that currency’s network when they add new transactions into a verified block.
Why mine cryptocurrencies
Cryptocurrencies are relatively new, but that doesn’t mean there aren’t opportunities for investing. If you can help a person mine cryptocurrencies like Bitcoin or Ethereum, they’ll pay you as long as their equipment keeps running. And if you end up with more cryptocurrency than they do, it’s yours to keep!
Difficulty level
Intermediate - Advanced Time to complete: 2 hours Number of steps needed: 7 (detailed below)
What is Proof of Work (PoW) and Proof of Stake (PoS)?
Proof of Work (PoW) and Proof of Stake (PoS) are methods by which blockchain networks reach distributed consensus. They are two of several consensus mechanisms that help to protect against malicious attacks or fraudulent transactions, while simultaneously ordering transactions into a linear sequence, such as in Bitcoin. PoW was created first, with Satoshi Nakamoto proposing it in his whitepaper as a solution for spam on an early version of bitcoin.
Setting up your mining operation
Cryptocurrency mining requires specific hardware and equipment, not to mention a power source. Depending on your specific setup, you’ll need a lot of processing power, whether it’s CPUs or GPUs. But no matter what type of processor you use, one piece of equipment is an absolute must-have if you’re going to mine cryptocurrency. It’s called an ASIC miner; we’ll talk more about them below.
Pool mining vs solo mining
When you mine for cryptocurrency, you’re essentially helping to verify a transaction, which adds it to a public ledger of transactions called a blockchain. Doing so requires you to run an application on your computer (or other device) that performs these tasks automatically.
Electricity costs – the hidden cost behind mining cryptocurrency
If you’re mining cryptocurrency, particularly if it’s a proof-of-work coin like Bitcoin or Litecoin, you have no doubt heard of ASICs. These are specialized computers that are designed to solve cryptographic hashing problems—the same problems being solved by your GPU or CPU—but much faster. Before you invest hundreds into an ASIC miner, though, there is one thing you should know. In short: The more power you use, the more money you will make.
Step-by-step instruction for those new to this technology
For people who are new to cryptocurrency mining, it’s important they know what they’re getting into. Like any other type of investment, there are risk factors that need to be considered before jumping into cryptocurrency mining. For example, bitcoin miners may spend a great deal of money on hardware or electricity without seeing any return on their investment for months or years.