If you have ever taken even the slightest interest in online trading, then you have heard of the word cryptocurrency.
Cryptocurrency is a virtual currency that is based on blockchain technology and stored in a digital ledger. Most cryptocurrencies are decentralized unlike paper money that is governed by centralized banking systems.
What is cryptocurrency mining?
Also known as cryptomining, it is the verification process of various cryptocurrency transactions. The process involves the addition of these transactions into the blockchain digital ledger.
Blockchain technology is instrumental in cryptocurrency mining. It is a record-keeping technology or a public ledger that is behind the whole concept of cryptocurrencies. It records every cryptocurrency transaction across its network.
Cryptomining has grown exponentially in the last 10 years.
Some of the most common cryptocurrencies include Litecoin, Ripple, and Stellar Lumen. However, Bitcoin is the most popular cryptocurrency.
A majority of people consider Bitcoin as the original cryptocurrency. Over the past few years, it has made headlines in mainstream media. Bitcoin offers a platform where investors can engage in peer-to-peer transactions using the blockchain technology.
With Bitcoins, users have control over financial transactions. They are issued with a ‘private key’ where they can decrypt their transactions. Thus, anonymous transactions can easily be undertaken.
Types of cryptocurrency mining
There are various types of cryptocurrency mining. They include:
- GPU mining
The popularity of GPU mining is undeniable. It utilizes graphics cards. It is efficient as compared to other crypto mining methods. Even cloud miners incorporate GPU mining into their operations.
The initial costs of purchasing a well-performing GPU mining rig is approximately $3000. However, it pays much faster.
- Cloud mining
Cloud mining is one of the most popular ways to go about crypto mining. Here, an individual of corporation funds a portion of the mining operation and rent out the rig to miners.
It is the best option for people who want to invest in cryptocurrencies but are not financially able to purchase their rigs.
- CPU mining
CPU mining uses processors in the mining process. It was popular back in the days but as technology continued to evolve, it proved to be slow. Miners could go for months without generating the slightest revenue.
Now that you have a clear understanding of the three basic types of crypto mining, how do you choose the right one for you?
The type of method you use depends on several variables. For instance, you need to know how much money you are willing to invest, if you are looking to own a rig, among other factors.
So, how does crypto mining work?
There are two functions in crypto mining. These functions include the addition of transactions to the blockchain, as well as, releasing new currency.
For successful mining, a ‘miner’ needs a computer with reliable resources and a specialized program. This program allows a user to engage in competitions that entail solving complicated mathematical problems using cryptographic hash functions. The hash functions are instrumental in the unique identification of data. A miner who is the first to crack the hash values is entitled to a reward.