Is mining dead? Spoiler: no
Part of the very fabric of how cryptocurrency works is a mechanism to reward users for contributing to the ecosystem by validating each successive transaction. Depending on the particular coin, that can be a fairly resource-heavy digital task, requiring lots of computer power.
One of the main strengths of the blockchain system that underpins digital currency is that each time there’s a new transaction, the whole chain leading up to it is validated. This reduces the threat of fraud or theft, as past transactions cannot be changed or reversed unless all nodes on the network agree.
By storing a copy of the blockchain, you are providing a service to the community, and the reward comes in the form of cryptocurrency mining. While there are naysayers who believe mining is dead, or not viable in the first place, new technologies are making it easier and more desirable to start mining.
The reports of mining’s death have been greatly exaggerated. We’ll take a look at some new mining practices and some ways that cryptocurrencies are keeping users engaged in the process.
The heart of most cryptocurrencies lies in a cryptographic hash function, where the full string of transactions is parlayed into a hash code or digital digest via a variety of algorithms. Recently, bitcoin has seen a drop in value, leading many miners to shut down their operations.
In fact, the ‘difficulty’ rating for mining bitcoin just saw it’s second biggest drop in difficulty since 2011 after a long, steady climb.
While some see this is a risk, others see an opportunity to start mining as the difficulty decreases. This ebb and flow is a natural effect, and much like the value of different coins rises and falls, so too does the difficulty or hash rate.
While it can be very resource intensive to be a solo miner, becoming part of a mining pool allows you to share the reward given for the entire pool. With over 200k transactions on any given day — be it bitcoin, for example — would be nearly impossible for a single user to verify every transaction.
The benefit of a mining pool is the shared computer processing power, while the risk is giving too much authority to a group of users. The decentralized nature of cryptocurrency means that no central authority has too much control over the consensus on the network, meaning that security can be threatened.
Joining a mining pool is the easiest way to get involved in mining, just make sure that you choose one carefully. The system benefits from having many small pools rather than one large one.
Whether solo mining or mining as part of a pool, you’ll need dedicated mining software running on your machine. Cloud mining does not require software, but beware the many scams out there in this space. Many require you to pay upfront, and take more than their share of the rewards you help generate.
While mining initially was done using processor power, quickly the benefits of using a graphics processing unit were realized. Better efficiency, lower power use, and faster hash rates make GPUs the hardware of choice for most serious miners.
In fact, many people build dedicated rigs with an array of GPUs installed to increase their processing power. That also increases their power consumption, and therefore many miners have moved to where energy costs are cheaper or where there is a sustainable, renewable energy source.
Many large mining firms have moved to areas where electricity is cheap and energy is abundant and built large data centers to increase profitability. Hydro mining is the practice of doing this where hydroelectric power is available. Iceland is a popular country due to the abundance of geothermal energy.
Getting a powerful GPU for your home PC and joining a mining pool can get you started and earn a decent profit each month.
Instead of having a PC dedicated to mining, ASIC miners are dedicated pieces of hardware specifically designed for the mining process. This means they use the least amount of energy possible to complete the task.
Currently, ASIC miners are no more than the top-rated GPU cards cost, and are much more efficient. You’ll want to choose one based on the type of cryptocurrency you want to mine, since the system will vary.
Mining still alive and well
As you can see, with both new hardware and software solutions, mining is still alive and well – with plenty of options for both companies and individuals. The recent reduction in difficulty and lowering of the hash rate for bitcoin makes it a good time to join in.
When selecting a mining platform, choose a trusted one and make sure their ideas align with your own. Beware of scams, do your research, get a good piece of hardware and you can turn a decent profit — especially if energy is affordable where you live.