Cryptocurrency Mining For Dummies
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Cryptocurrency mining is a relatively new concept that started slowly and has, over about a decade, developed into an entire industry with a wild-west-gold-rush reputation.

The mining of “digital gold” in the form of cryptocurrencies is often painted as a get-rich-quick scam, with comparisons to tulipmania and the gold rushes of years past.

Indeed, the industry is rife with hype, scams, and misleading promotions, and there’s a lot of room for error. However, there are profitable mining ventures, and there is still room for you, as a new miner, to profit from cryptocurrency mining if you do your research, do your homework, and plan carefully.

Cryptocurrency mining basics

Units of cryptocurrency, such as Bitcoin and others, are generated and secured through an algorithmic process colloquially referred to as mining.

The process of mining underpins peer-to-peer cryptocurrencies by verifying and ordering transactions. Miners run mining “rigs,” computer equipment that generates new blocks of transactions to be added to the cryptocurrency blockchain. In return, miners are rewarded by earning newly minted coins and transaction fees.

Cryptocurrency mining fortifies the peer-to-peer network of nodes and makes it more expensive and difficult for the network to be attacked. Miners are an integral part of the system’s protection against hackers and others attempting to subvert the cryptocurrency.

It is important to stay up-to-date in the cryptocurrency mining space, so check out the following list of resources to stay current with what’s going on:

  • Bitcoin Talk: Use Bitcoin Talk to inquire into almost any cryptocurrency topic, including (but definitely not limited to) mining. Despite the name, it’s not just for bitcoin anymore; you’ll find many different cryptocurrencies being discussed. For example, it is where most popular alternative cryptocurrencies were announced prior to launch.
  • Bitcoin subreddit: The bitcoin subreddit provides a great forum for lots of breaking news and current events and provides a window into the current sentiment in the community. It’s not all serious stuff, though; you’ll find plenty of memes, jokes, and other nonmining content.
  • Bitcoin Beginners subreddit: The bitcoin beginners subreddit is an even better resource for recent entrants into the ecosystem, providing plenty of great information for newbies.
  • CoinDesk: CoinDesk is a decent news source in an industry riddled with faulty cryptocurrency news outlets. It also provides exchange rate data from a variety of different cryptocurrencies.
  • CoinJournal: CoinJournal is also a good source for cryptocurrency related news, but clearly separates press releases from news articles so users can differentiate the public relations messaging from journalism.
  • Bitcoin Magazine: Bitcoin Magazine has long been a reliable news outlet in the cryptocurrency space. Although print releases of the magazine stopped years ago, it still provides good and consistent news coverage on its website.
  • Merkle Report: The Merkle Report curates a wide variety of relevant content from various news sources in the cryptocurrency space. It offers a good one-stop-shop for news across the industry.
  • Messari: Messari has a ton of cryptocurrency focused data, research, and news from across the industry. It also offers a daily newsletter and weekly podcast to help you stay up-to-date on current trends.
  • Block Digest: Block Digest is an excellent source of news in the form of a weekly podcast that features various community members discussing news and headlines from the cryptocurrency space.
  • Stack Exchange: The Bitcoin Stack Exchange has a large trove of questions answered by other cryptocurrency enthusiasts. Anyone can post a question or an answer, and whether you are looking for specific insight, chances are someone has already answered the question you have.

Choose a cryptocurrency to mine

Don’t rush your choice of which cryptocurrency you’ll mine. The choice can make or break the viability of mining.

Some of the most important attributes to consider when selecting which cryptocurrency to mine include longevity, security, community support, relative decentralization, coin-distribution method, and personal preference.

If the cryptocurrency you choose to mine is missing one or several of these central aspects of a well-functioning peer-to-peer system, it may be difficult to maintain viability and profitability long term.

The following table provides background information about commonly mined cryptocurrencies:

Coin Ticker Symbol Max Coin Distribution % Supply Issued Years Active Current Price Network Hash Rate Mining Algorithm
Bitcoin BTC/XBT 21,000,000 85% 10 $10,385 72 EH/s SHA-256d
Ethereum ETH N/A 4 $185 172 TH/s Ethash
Bitcoin Cash BCH 21,000,000 85% 2 $310 2.2 EH/s SHA-256d
Litecoin LTC 84,000,000 75% 8 $75 340 TH/s Scrypt
Grin GRIN N/A 1 $3 4.14 GH/s Cuckoo Cycle
Monero XMR N/A 5 $81 327 MH/s CryptoNight
Dash DASH 18,900,000 51% 5 $94 3 PH/s X11
Zcash ZEC 21,000,000 34% 3 $50 5 GH/s Equihash

 

Pool versus solo mining

Depending on your hardware capabilities and the block difficulty for the cryptocurrency you intend to mine, the odds of creating and mining a new block by solo cryptocurrency mining alone may be very low: within the realm of purchasing a winning lottery ticket. Thus, it often makes more sense to mine as part of a mining pool, to ensure steady and relatively constant rewards.

Pool mining is when various miners combine, or pool their mining hash rate resources to find blocks as a team and share the subsequent rewards between members of the team, proportionally to how much each miner contributed.

Here is a quick list of some of the top mining pools by cryptocurrency:

Bitcoin (BTC):

Litecoin (LTC):

Ethereum (ETH):

ZCash (ZEC):

Monero (XMR):

Cryptocurrency unit prefixes

Zettahash ZH sextillion hashes 1021 1,000,000,000,000,000,000,000
Exahash EH quintillion hashes 1018 1,000,000,000,000,000,000
Petahash PH quadrillion hashes 1015 1,000,000,000,000,000
Terahash TH trillion hashes 1012 1,000,000,000,000
Gigahash GH billion hashes 109 1,000,000,000
Megahash MH million hashes 106 1,000,000
Kilohash kH thousand hashes 103 1,000

 Notes: The names of these numbers are based on the short scale large-number naming convention that is used throughout most of the English-speaking world. Much of the non-English-speaking world uses the long-scale and will therefore use different names for these numbers.

For example, while a tera (1,000,000,000,000) is called a trillion in the short scale, on the long scale it is known as a billion. The numbers’ prefix names (Exa, Peta, and so on), and their symbols are the same in both systems; only the numbers names change (for the five largest numbers in the preceding table).

The abbreviation of Kilohash is kH, with a small k, because the letter k capitalized in ISU (the International System of Units), represents kelvin, a measurement of temperature. These number prefixes can be used in any context in which large numbers are employed, but in the cryptocurrency mining space they are typically used for hashes and watts.

Coin divisibility in cryptocurrency mining

Cryptocurrencies can be divisible into many small pieces, depending on the cryptocurrency protocol specifications. Just as with dollars, transactions are not always carried out in whole dollars, but can be fractions of a dollar (dollars and cents), so, too, cryptocurrency transactions can be made using coin fractions. You don’t have to buy whole bitcoins, for example.

Here is a rundown of some of the most common units used to refer to amounts of bitcoin (there are others). Other cryptocurrencies have similar unit divisibility. The list uses BTC as the bitcoin “ticker symbol,” but a common alternative is XBT.

Megabitcoin MBTC million bitcoin 106 1,000,000
kilobitcoin kBTC thousand bitcoin 103 1,000
hectobitcoin hBTC hundred bitcoin 102 100
decabitcoin daBTC ten bitcoin 101 10
bitcoin BTC one bitcoin 100 1.0
decibitcoin dBTC tenth bitcoin 10-1 0.1
centibitcoin cBTC hundredth bitcoin 10-2 0.01
millibitcoin mBTC thousandth bitcoin 10-3 0.001
microbitcoin µBTC millionth bitcoin 10-6 0.000 001
satoshi sat hundred millionth 10-8 0.000 000 01

 

About This Article

This article is from the book:

About the book authors:

Peter Kent is a longtime technology author who also created the online course Crypto Clear: Bitcoin & Cryptocurrency Made Simple. Tyler Bain is a professional engineer who specializes on the electrical grid. He is also a Certified Bitcoin Professional who focuses on system resiliency and mining mechanics.

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