How to Earn Cryptocurrency Through Mining

Contrary to traditional money printed by our governments, digital assets – such as, Bitcoin – is created through crypto mining. In this process, miners with specialized computers solve complex mathematical problems to validate transactions. Whenever a puzzle gets completed, a new block is added to the blockchain ecosystem. This helps the miner earn a coin and keeps the blockchain networks secure and functional. 

While crypto mining is important for maintaining decentralized cryptocurrencies, it also comes with a few notable challenges. For example, the process requires immense computational power, which may increase energy consumption and affect our environment.  

Crypto Mining: The Truth Behind the Veil of Enigma 

Type of Crypto Mining Puzzles (Source: Investopedia) 

At its core, crypto mining usually involves a miner solving complex cryptographic puzzles by using a computer made of two technical components – 

• Graphics processing units (GPUs) 
• Application-Specific Integrated Circuits (ASIC) 

The process also relies upon a specific mining algorithm, which determines how crypto transactions are being validated. For example, Bitcoin uses SHA-256 for validation, while Ethereum used Ethash before switching to PoS (Proof-of-Stake). 

While there’s an incentive available to reward the miners, only one person (who completes the puzzle first) gets it. Additionally, the mathematical puzzles keep on getting harder and harder, as miners keep solving them – which may require more computational power. 

Note: No matter how difficult the puzzle is, your reward will remain the same – a combination of transaction fees and newly minted coins. 

Types of Cryptocurrency Mining 

The crypto mining method you should use to validate a transaction will depend on the type of blockchain network you’re working on. Here’s what you need to know about it – 

1: Proof-of-Work (PoW) – The Classic Method 

The OG mining method, proof of work, is still used to mine Bitcoin and many other earlier cryptocurrencies. To follow this method, you’ll need a high-end rig with mining hardware like ASICs and GPUs. However, the incessant increase in difficulty level in the PoW method means that you’ll have to keep on investing in your computer continuously. 

2: Proof-of-Stake (PoS) – A Less Resource-Intensive Alternative 

Instead of making miners compete with extremely high computational power, proof-of-stake chooses validators based on two things – 

• The number of coins they have 
• How much ‘stake’ they’ve taken in the network 

This reduces the need for investing in expensive hardware while limiting the issue of energy consumption even more. However, PoS is used to validate Ethereum coins, so the rewards aren’t as high as those of Bitcoin mining. 

3: Mining Pools 

How Crypto mining pools work (Source: ResearchGate) 

Solo mining, especially by using the PoW method, can be quite challenging for many miners. So, sometimes, they join forces with each other in a mining pool setup.  

These pools help in combining their computational power, which, in turn, increases their chances of winning rewards. Nonetheless, the number of minted coins or the transaction fee you’ll get through this method is quite low. 

How to Choose the Right Mining Software? 

While crypto mining is a resource-intensive process, it can also be a fun and rewarding experience if you know what you’re doing. However, before you begin, we think it’s better to understand what kind of hardware you may need.  

1: ASIC Miners – The Crypto Powerhouse 

ASIC mining rigs will offer the highest and most intensive power to help you mine crypto coins. However, they’re also quite expensive and come with various centralization concerns.  

Pros: 

• Better efficiency and higher hash rates  
• Easy to set up  
• Perfect for PoW-based mining 

Cons: 

• Limited flexibility  
• The rapid evolution of ASIC tech makes semi-older mining equipment less profitable 
• Extremely power-hungry and harmful to our environment 

2: GPU Mining – a Flexible Choice 

If you prefer a less intensive but more versatile approach, using a GPU mining setup can be a great option. While these are not as powerful as ASICs, they can offer a more adaptable mining experience for beginners. You can also mine different altcoins with GPU miners. 

Pros: 

• Has a great resale value (can be used for gaming, graphics rendering, etc.) 
• Better accessibility (GPUs are available in every computer store) 
• Has a larger DIY community  

Cons: 

• Less efficient than ASIC miners 
• Generates too much heat due to intensive mining procedures  
• Lower scalability level 

3: Cloud Mining – The Hands-Off Method 

If you are not able to buy such expensive rigs, you can also rent some mining power from remote data centers. This process is also known as cloud mining and removes the hassle of hardware maintenance. However, some cloud mining services tend to get super expensive due to how much they must spend for security purposes. 

Pros: 

• Tends to be more cost-effective compared to the other two methods  
• More convenient and doesn’t require any technical skills at all  
• Lower energy cost and higher level of scalability   

Cons: 

• Little to no user control 
• Can pose some contractual risks  
• Limited transparency 

Mining Pool Vs. Solo Mining – Which One’s Better? 

Mining alone usually means you’re keeping 100% of the rewards. However, the chances of solving a block are incredibly low, considering you’re up against millions of competitors. Also, solo mining requires you to invest in a high-end mining rig.  

The electricity consumption of the process will also be quite high, and you’d require a lot of patience before for solving the puzzles. 

On the other hand, joining a mining pool means –  

• You have a higher success rate, as a lot of people are working together to complete a block or a mining project. 
• It offers a steady income (albeit the amount tends to be quite small). 
• Since you’re not depending solely upon your own setup, even a less powerful rig will be enough for you. 

If you want to focus on maximizing your crypto profit, using a mining pool setup will be the best option. However, if you are confident in your skillset, solo mining can make you richer than ever before. 

How to Calculate Your Mining Profitability? 

Profitability isn’t just about how much cryptocurrency you’ve earned. It’s about ensuring that your other expenses don’t outweigh the rewards you’re getting. 

Some of the factors you need to consider in this aspect are – 

• Electricity Expenses: Mining, especially if you’re going solo, can be quite power-hungry. So, if your electricity bill seems to be too high, you may not make enough profits to cover your other costs. 
• Hardware Efficiency: High-performance mining rigs, such as ASICs, usually use less power per hash – which makes them more profitable than standard GPUs. 
• Mining Difficulty: The more difficult a cryptographic equation is, the more power it will require to get solved. 
• Mining Pool Fees: If you are part of a mining pool, be sure to check the fees. Some of them usually charges more than others considering the features and level of security they are offering. 

Nicehash Mining Calculator (Source: Nicehash) 

If calculating your profits seems too difficult for you, you can also use a tool like Nicehash or WhatToMine. They are easy to use and can estimate your potential earnings correctly if you put your pool fees, electricity cost, and hash rate.  

The Challenges of Crypto Mining 

Mining cryptocurrency might seem like a gold rush to you, but it comes with a fair share of challenges, too. Here’s what you need to know about them – 

1: Increase Mining Difficulty 

Every time you mine a coin, a new block is added to the blockchain, and the difficulty rating of the cryptographic puzzles increases. So, after a while, your older GPU or ASICs will start struggle to complete the new mathematical problems. 

2: Energy Consumption 

The higher the difficulty of a puzzle is, the more power your rig will require to solve it. This may increase its energy consumption level and rack up massive energy bills. Moreover, it may also affect our environment. 

The Bottom Line 

Since the introduction of Bitcoin in 2009, the crypto-mining landscape has evolved so much. With the ever-rising energy concerns, many newer projects are shifting towards more sustainable models, like PoS.  

Meanwhile, many developers are also bringing innovations in hardware efficiency and mining algorithms to make the process more accessible and profitable. 

So, does that mean crypto mining is still worth it? 

Yes, but it’ll depend on how well you are managing its challenges. If you stay informed of the market and invest in your rig (and mining method) wisely, it can certainly be a rewarding venture for you.