What is Mining and which cryptocurrencies to mine | Tips and Tricks

One of the most talked about topics when it comes to cryptocurrencies is the mining, especially now that the environmental issue is at the top of the political and social agenda. Chances are you’ve read or heard this term while reading a feature on the web or watching a news report, and are now interested in learning more.

Perfect: in this guide we will try to explain everything you need to know about mining, that is what it is, how to do it, in addition to suggesting the best cryptocurrencies to mine.

What is mining

Let’s start with a technical and precise explanation, for those who are already familiar with cryptocurrencies, while if you still have no knowledge in this field, you will find in the next paragraph a simpler explanation within everyone’s reach.

Mining is the process through which new transactions are validated within a blockchain according to the Proof of Work validation protocol (“proof of work”). The goal is to create a new block containing all the transactions, which is added to the others already generated.

The term mining, from the English verb to mine (“Extract”), literally means “extraction”. However, it is important to make a clarification immediately: the so-called miners, that is, those who carry out the mining activity, do not extract any cryptocurrency physically but only in a broad sense.

To better understand what we are talking about, we invite you to continue reading our guide.

How mining works

At the base of mining is the solving a complex mathematical problem, which in turn refers to an encrypted hash. To find the correct hash string, miners use the computing power of their computer: the higher this is, the greater the chances of success.

The first miner who finds the solution is entitled to one reward for your proof of work, for example a Bitcoin. First, however, it is essential that the other nodes in the network also agree with the miner’s solution, in order to validate the new block and add it to the blockchain.

The mining business has changed a lot over the years. In 2009, when Bitcoin was launched, the difficulty of mathematical problems was much lower: anyone could solve them with a normal computer.

Year after year, as the entire cryptocurrency market grows in value, the competition between miners it has increased exponentially. As a result, the difficulty of the problems has grown dramatically, as have the computing power requirements for each computer.

Hence the birth of mining farm e mining pool, complex and expensive structures that have unrivaled computing skills for those who choose the individual mining strategy.

The mining activity in detail

As already explained, mining is an activity strictly linked to the functioning of the blockchain. First of all, it must be remembered that the blockchain stores transaction data within a series of blocks created by the nodes of the network, or rather by a computer system. For the validation of the whole process, it is essential that the chain is closed. And this is where mining comes in.

In fact, the elements required to complete the operation are a random numeric value (“nonce”) and an alphanumeric code (“hash”), which definitively closes a block. What does the miner do then? It’s very simple (in quotes): it performs millions of calculations per second to find the hash that verifies the operation.

Once the correct string is found, the server gives its approval and the lock closes.

On the same topic: How to buy Bitcoin and other cryptocurrencies

Come fare mining

Are you considering becoming a miner yourself? First of all you need to be in possession of the equipment at the base of the mining activity:

• High-performance computer: it is the basis of the calculation activity, to be carried out seven days a week, 24 hours a day. The better the hardware available, the greater the chances of “mining” cryptocurrencies. Online you can find numerous models for sale, including – above all – ASICs (Application Specific Integrated Circuits), considered the reference points for Bitcoin mining.
• Broadband and ad hoc energy contract: two other essential elements are the use of a stable and broadband Internet line, together with the signing of an electricity contract that meets the requirements of an activity such as mining.
• Cryptographic hash software: cryptographic hash software, a software dedicated to decrypting the correct hash code, is also added to the list. There is no single program for any cryptocurrency, but each individual digital currency requires a different software cryptographic hash.
• Wallet and registration on the exchange platform: finally, it is necessary to open a digital wallet, where to keep the cryptocurrencies that are extracted as a reward for the proof of work. And if, as is likely, you want to change into FIAT currency in cryptocurrency, you need to register on one of the many cryptocurrency exchange platforms available.

These are the indispensable requirements for those who approach mining for the first time. Then, however, it is equally important to understand which strategy to adopt to do it. Basically, there are three different ways: doing everything alone, playing as a team, exploiting the network. Here, in short, what it means.

Individual mining activity

Doing mining yourself, without the help of others, is still possible, as long as you create a super computer able to compete with others. It is then necessary to take into account the expense for the energy bill and a substantial budget for the initial investment and the maintenance.

Mining pool

An old saying says that unity is strength. It’s just a saying, but more and more people are taking it literally in the cryptocurrency world, especially in the mining community. And the reward? The earnings are divided according to the years spent in the group and the hashrate of your hardware.

Mining cloud

The most modern and interesting solution among those already listed above. It consists in relying on a external provider offering the required computing power to find the alphanumeric string needed to validate the transaction and close the block. The benefits of this solution are considerable: lower initial investments, lower energy consumption, zero maintenance costs.

Read also: NFT, what non-fungible tokens are and how they work

Which cryptocurrencies to mine

Premise: only cryptocurrencies associated with the Proof of Work validation protocol are eligible for mining. That said, to date the most convenient cryptocurrencies to mine are:

Bitcoin

Bitcoin mining is to be considered as one of the best long-term investments, since we are talking about the cryptocurrency with the greatest earning potential. It is equally true, however, that over the years it becomes increasingly difficult to mine Bitcoin. Things will not get better in the future, on the contrary: the calculations to “extract” new cryptocurrencies will be even more complex, consequently more performing computers and greater energy consumption will be needed.

Ethereum

A similar argument can be made for Ethereum mining, albeit with considerable differences. Like Bitcoin, the value of Ethereum is growing, and this cannot fail to have significant long-term benefits. However, there is a problem: the Ethereum blockchain could switch to the Proof of Stake validation protocol, making mining useless. This is an important issue, especially when related to initial investments. In any case, mining Ethereum today is worthwhile because the value of the cryptocurrency in the future could be much higher than it is today.

Dogecoin

In recent times Dogecoin mining has been one of the most searched keywords on the net, due to the increased interest in the so-called “people’s cryptocurrency”. However, it is not only this that is attracting a growing number of people to Dogecoin mining.

The three main benefits related to the business are:

• undermining Dogecoin is easier compared to both Bitcoin and Ethereum, therefore it requires a smaller initial investment
• there is no limit to availability of Dogecoin, unlike Bitcoin
• the algorithm for undermining Dogecoin (scrypt) is the same used for the mining di Litecoin

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