What is mining?

What is mining?

09 Dec, 2019 Judy Rubio

Mining is the process of verifying transactions on the blockchain. You direct the computing resources of the device on which you mine to maintain security, record blocks, confirm transactions and tackle other technical issues. For this, you get a reward in the form of coins.

This phenomenon appeared on January 3, 2009, when Satoshi Nakamoto (a person or a group of people who created bitcoin) was the first to mine 750 BTC. After that, the first transaction was conducted - on January 12, 2009, Satoshi and Hell Finney exchanged 10 bitcoins.

Mining began to bring significant income in the summer of 2010 - bitcoin was gaining popularity. It is noteworthy that at that time 1 BTC was worth about 10 cents. 

What do you need to start mining?

To start mining cryptocurrencies efficiently, you need to know what parts the mining farm consists of and what is needed for its operation.

-       The most important and expensive thing is equipment. It can be either a powerful computer capable of resource-intensive tasks, or a regular home PC. But it is worth remembering that the PC was not originally intended for cryptocurrency mining and does not have sufficient power - mining “eats” all its resources.

-       Effective cooling. It is worth remembering that the process makes even the most powerful machines work to the maximum. This leads to strong heating of the system. It is vital that you keep the room cool and think about a ventilation system so that your devices do not burn out.

-       Storing space for devices. A mining farm can occupy a large space. Someone removes entire hangars, while others rent corners in data centers or mine right in the basement. A well-equipped location increases the safety and control of the entire process.

-       Affordable energy at a low price. The cheaper the resources will be for you, the more benefits you will receive. It even encourages some to mine in places that are not at all intended for this - for example, at nuclear power plants or ATMs.

-       An electronic wallet, software and a good Internet connection. A wallet will be needed to store the received currency. It can be downloaded on the official website of cryptocurrency developers. By software we mean mining programs that work on all available platforms. Well, you need to take care of a reliable Internet to ensure continuous mining.

How does it work?

Miners receive a reward for maintaining the stability and functioning of the entire cryptocurrency system.  A simple chain: you spend the resources of your mining farm, these resources are necessary for the functioning and life of, for example, bitcoin. And in return for these costs, you get coins.

If your resources are not sufficient for effective mining, you can enter the mining pool and mine cryptocurrency in a group. Then the reward can be evenly distributed between you or randomly won by someone from the pool.

Pros and cons of mining

Pros:

First, you need to remember that mining will be relevant as long as cryptocurrencies exist, and they can be mined. This gives you some guarantees and reduces risks. Now cryptocurrencies are showing great interest in many areas and there is a positive development trend.

Secondly, you are more likely to recoup costs and earn money on mining. To do this, you will have to wait until the process blocks the investment in your farm. If you choose the right cryptocurrency for mining - income is almost guaranteed to you.

Minuses:

The main disadvantages are energy consumption, PC maintenance and the need for continuous modernization. These are the main aspects that create a headache for miners.

So, take it seriously: plan all the important aspects from the check-list and decide on a coin for mining. And only then start the next steps - purchase equipment or run programs. Mining can be very beneficial if properly organized.