A Brief Guide to Crypto Mining

The famous Chinese sage Lao Tzu is credited with saying: ‘A journey of a thousand miles begins with a single step.’ In other words, every great endeavor starts with a small initial effort. To simplify it further, every big achievement starts with something small.

Let’s take a look at our crypto mining guide and consider the steps beginners need to take to start mining digital coins this year. The first step on this journey is gaining knowledge about...

What is Cryptocurrency

Cryptocurrency refers to digital assets or digital money. Unlike dollars, euros, pounds, and rubles, which are known as fiat currencies in the crypto community, the payment systems of Bitcoin and most altcoins are decentralized.

Digital coins are created by many independent ‘producers’ called miners. So, cryptocurrency is a product of mining and isn’t issued by central banks or governments. This means that it operates independently from the traditional banking sector and fiat money emission centers. Informally, digital money is also called ‘crypto.’

You should realize that cryptocurrency is a virtual asset without physical backing. However, its value is still based on real factors like:

• Mining cost
• Limited supply
• Market demand

The core of cryptocurrency is blockchain technology, which literally means ‘a chain of blocks.’ The essence of this system is in the encryption and data storage distributed over numerous independent computers. All these devices are interconnected in a single, unified network – blockchain.

The process of creating crypto in the blockchain works like this: cryptographic algorithms are used to solve complex mathematical puzzles, and as they are decoded, new blocks are generated. This is how mining digital coins works. Miners are rewarded in the cryptocurrency they generate for producing and subsequently verifying new blocks in the blockchain. So far, so simple, right?

Moreover, ‘cryptocurrency’ is a general term. Back in 2009, there was just one — Bitcoin. Today, there are literally hundreds, if not thousands of them. The classification of cryptocurrencies looks like this:

• Bitcoin (BTC)
• Altcoins: all other types of cryptocurrencies (Ethereum, Solana, and others)
• Stablecoins: coins tied to the fiat currency exchange rate (USDT/USDC)
• Tokens

All these digital assets differ in functionality, algorithms, operating protocols (PoW or PoS), their moment of appearance on the market, and volatility levels. Bitcoin clearly remains the most popular cryptocurrency due to historical and marketing reasons.

And now, it's time to move on to the second step of our beginner guide to mining cryptocurrency, which is...

Выбор криптовалюты и криптокошелька

It's obvious that the first step is to choose a cryptocurrency to mine. Next, you should set up a crypto wallet, where your hard-earned coins will be securely stored.

There’s a vast selection of cryptocurrencies for mining available on exchanges. The most common choice is Bitcoin and other altcoins that use the SHA-256 algorithm, including Bitcoin Cash or Bitcoin SV. Other cryptocurrencies use unique algorithms; for instance, Litecoin operates on Scrypt.

When calculating mining profitability, you should consider the electricity costs in your region and the pool fees if you aren’t mining solo. However, the first crucial thing you need to realize is the computing power of your hardware, measured in hashrates (MH/s for GPUs or TH/s for ASICs). Keep in mind that the cost of mining a block in the Bitcoin blockchain, as with many other cryptocurrencies, is steadily increasing. This means you'll need to continually boost your equipment's power, which requires significant initial investments.

If you want to choose the best coin for mining, you should calculate its profitability using special services. You can use online calculators, but keep in mind that they may not provide absolutely accurate results even though they constantly change parameters. It’s also worth considering the volatility of cryptocurrencies when calculating the profitability on these calculators: this factor is challenging to predict, even for experts in the crypto industry.

Choosing a crypto wallet is simpler. It’s a specialized software or hardware solution for the long-term storage of private keys and digital coins. Crypto wallets are divided into two types: hot and cold wallets.

When choosing a crypto wallet, you need to determine its intended use. If you often make transactions, a hot wallet is preferable, like the secure EMCD Service, for the exchange and withdrawal of cryptocurrencies, which is always at your fingertips. However, if your primary goal is to store cryptocurrency, you should choose a cold wallet, which also has its own advantages and disadvantages.

Hot wallets are ideal for active transactions, especially if the cryptocurrency you’re mining is primarily intended for payments and exchanges. In this case, you would definitely choose a hot online wallet, which provides you with a unique security code. The main downside is the risk of hacking and theft since a hot wallet is an online service that you access through a website.

Cold wallets don’t have Internet access and are usually built on flash storage devices. Unlike virtual wallets, they are physically isolated. That’s why they offer significantly better security. Notable examples of cold wallets include Trezor and SafePal. They are perfect for storing mined cryptocurrency, providing almost complete security. However, they aren’t very convenient for frequent, regular transactions.

In summary, there is no one-size-fits-all wallet; the best choice depends on how you plan to use your mined cryptocurrency.

Our next step will be a glimpse of...

How Cryptocurrency is Mined

The most intriguing thing here is how to mine cryptocurrency. The most common method is mining itself. Another viable alternative for earning crypto is staking.

Let’s take a closer look at both methods.

Mining. It involves solving complex cryptographic puzzles in the blockchain to generate new blocks. This requires powerful computing hardware like ASICs or GPUs. These devices technically handle the task of generating blocks for the blockchain. Crypto mining is based on the Proof-of-Work (PoW) protocol, which is used to produce Bitcoin and related digital assets.

Staking. It’s a way of making passive income and maintaining the blockchain. The owner deposits and locks their assets into a smart contract on a blockchain that runs on a Proof-of-Stake (PoS) algorithm like Ethereum (ETH) in its PoS form. In return, they get rewards after the contract period ends. During the transaction, data is verified and stored in a public database.

So, mining is the direct extraction of cryptocurrency and can potentially be more profitable. Staking is a way to invest in cryptocurrency and generate passive income.

And now we need to find out...

What Mining Hardware is Better

Mining requires high-performance hardware like ASICs and GPUs. To start staking, you need the digital assets and special software.

Let’s explore modern crypto mining methods.

Option 1: ASIC miners or just ASICs (Application-Specific Integrated Circuits)

They are high-performance mining machines. ASICs are designed specifically for crypto mining. Using these devices ensures highly efficient mining and brings you substantial profits.

This mining option is quite expensive since it requires large initial investment in purchasing.

Option 2: Graphics Cards (GPUs or Graphics Processing Units)

It’s worth noting that they aren’t as powerful as ASIC miners. The main advantage of GPUs is their cost — they can give you a good ROI within a few months.

Although this mining method becomes less popular, even when GPUs are set up in home mining farms. However, unlike ASICs, this hardware can also be used both for gaming and designing, which makes them multifunctional devices.

The leading ASIC developers are Chinese companies Bitmain, MicroBT, Innosilicon, and Canaan. The obvious choice for most is Bitmain. This company produces the famous AntMiner series of miners for Bitcoin mining. Their main competitor is MicroBT, known for its popular powerful mining hardware called WhatsMiner.

The best option for you is the Bitmain Antminer S19 Pro Hydro 184 TH miner. This model is one of the most reliable and has a well-deserved reputation within the mining community. It’s very efficient for Bitcoin mining since it has a good hashrate (184 TH/s) and optimal power consumption. The model operates on the standard SHA-256 algorithm used for Bitcoin mining. The miner runs very quietly due to its water-cooling system rather than air cooling.

Now, let's take another step and learn some valuable tips about...

Choosing Mining Software

Before diving into crypto mining, you need to get special software. This program is installed on your hardware. It's worth noting that the software should always be configured by specialists to ensure its proper operation during mining.

Here are the most popular and well-tested programs that allow you to easily mine cryptos:

1. MultiMiner. It’s compatible with operating systems like MacOS, Windows, and Linux, making its practical use multifunctional. This software enables you to switch quickly between mining systems (ASIC, FPGA, GPU). Additionally, it’s a multi-currency platform, allowing you to choose which crypto to mine. One downside, though not a major one, is that MultiMiner is only available in English.
2. Kryptex. It’s worth noting that miners often recommend this software. It has a user-friendly interface, easy installation, and settings allowing you to connect multiple computers to a single account. Kryptex automatically selects the most profitable coin to mine at any given moment, and it offers an easy process for withdrawing funds to your account. Another interesting thing to note, though: this software only works on Windows.
3. Computta. It's fairly easy to use software that works well for mining even from home. Its smart mode allows you to mine crypto in the background, which is quite convenient. However, the performance will naturally remain at a minimal, ‘home’ level.

There are plenty of mining software options out there, and the key factors in choosing the right one are your mining hardware and the power output you’re aiming for.

It’s time for another step, where we’ll recall the saying, ‘If you want to go fast, go alone; if you want to go far, go together.’

Mining Pool or Staking?

Part 1: Mining

You can start mining cryptocurrency in the following way:

1. Using your GPU. This ‘home’ option is relatively cheaper, making it ideal for solo miners. However, hashrate will be noticeably lower and is measured in MH/s. This means that solo mining isn't that profitable since miners earn significantly less compared to other methods.
2. Joining a mining pool. Here, you’ll benefit from getting significantly more powerful hardware – ASIC miners with hashrates measured in TH/s. The initial costs are higher, but the profits can be substantially greater within a few days. This is because the combined power of a mining pool is naturally greater than that of an individual ASIC, leading to computing blocks faster.
3. Choosing cloud mining. This is the least expensive way of crypto mining, but it comes with the highest risks. You might bump into scammers who deceive you with fraudulent contracts, or you could end up with zero or minimal profits.

To summarize, joining a mining pool significantly increases your chances of achieving profitability and boosting earnings. While rewards are not guaranteed, they are much higher than the other two options. As the saying goes, ‘If you want to go far, go together’ — that is, team up with other miners in a pool.

Everything depends on the ‘share’ (participation share) in the profits from mined blocks. The basic principle is the larger your investment in the share, the greater your potential profit. Also, don't forget about the commission fee, which is deducted from the pool’s profits by its owners.

Part 2: Staking

Today, staking is becoming increasingly popular and starting to compete successfully with mining, especially with Ethereum’s transition to the PoS (Proof-of-Stake) protocol. Unlike mining, which requires investing in high-performance hardware like ASIC miners, staking involves significantly lower startup costs.

To start staking, you simply need to buy a native blockchain token and freeze your crypto assets in a staking wallet for a certain period. In theory, your earnings will grow over time. However, cryptocurrency volatility is a significant factor: if the price of the staked cryptocurrency drops sharply during that year, your profits could vanish.

Keep in mind that the crypto market is like any other, with opportunities for profit and loss risks.

Cryptocurrency: The Process Begins

Mining involves the production and generation of new blocks in a blockchain. The process of crypto mining is about solving a specific, complex mathematical puzzle to compute a block while adhering to the conditions set by that particular blockchain.

Once a solution is found and a block is generated, it must be verified to ensure its correctness. The first miner to successfully verify the block receives a reward. A miner earns 3.125 BTC per each generated block in the blockchain. However, solo mining for these rewards is rare today due to the high and constantly increasing difficulty of finding blocks. As a result, most professional miners are joining mining pools. Consequently, their rewards for generating a block are typically proportional to their share of participation.

Now, let’s explore how much you can…

Earn from Mining

As a result of successfully mining cryptocurrency, you are rewarded with new coins credited to your wallet. It’s all about math.

As mentioned, the reward for mining a block in the Bitcoin blockchain is 3.125 BTC. At the time of writing this article, the Bitcoin price is $ 61 000: greed currently outweighs fear in the market. So, for a mined block, you will earn approximately $ 190 000. It sounds enticing, but is it realistic?

Let's keep counting.

The difficulty of mining Bitcoin, Ethereum, and other popular cryptocurrencies is continuously increasing. It’s a well-known fact even to beginner miners. According to expert estimates, you need to control at least 1% of the total network hashrate to earn stable rewards. Recently, the total network hashrate has been around 400 EH/s. This means that you need extremely powerful hardware with a hashrate of 4 EH/s to reach that 1%.

Achieving this level of hashrate is virtually impossible if you’re mining solo — that’s why so many miners team up into pools like EMCD.

he investment required to purchase this ‘super hardware’ amounts to $ 55 000, which only a few can afford. Additionally, the electricity consumption reaches up to 120 MW/h.

So, the conclusion is clear: solo mining is unlikely to be successful. Instead, joining a mining pool allows you to earn a modest but realistic share of the rewards. Sticking to this approach helps you receive earnings without investing in expensive hardware. Instead, you can rely on the team efforts in the pool.

Ways to Manage and Exchange Cryptocurrency

Clearly, people are using digital coins as a modern alternative to fiat money – a tool for saving, investing, trading on exchanges, purchasing goods and online services, and even as a ‘virtual currency exchange.’

You certainly can't store digital coins in banks, but you can keep them in crypto wallets, whether hot or cold. Let's explore the different ways to promote cryptocurrency obtained through mining. This brings us to the trendy concept of crypto marketing, which has gained significant traction lately.

Airdrop

An airdrop is literally free assets — a project issues free distribution of tokens or coins to crypto wallets. This can happen ‘just for fun’ or in exchange for completing simple tasks, like sharing a link or posting about the project on your Instagram. This generous crypto marketing exists for a reason — it’s a strategy to promote a new crypto project in the community through turning random or not-so-random users into stakeholders, creating a win-win situation for both organizers and users. Essentially, it's a way to boost new projects by engaging potential customers.

Here's a step-by-step guide for participating in an airdrop:

1. Set up a crypto wallet
2. Visit an online aggregator platform where the airdrop is taking place
3. Complete the verification process (KYC) on the aggregator platform
4. Subscribe to the project’s newsletter on its website or follow its social media page — this can be done by navigating to the ‘contacts’ section on the aggregator platform.

And then, seemingly ‘out of nowhere,’ you'll have cryptocurrency in ‘your hands.’ In more advanced airdrops, you can even receive what's known as ‘governance tokens’ — rights to limited project management, similar to how shareholders have a say in companies in the fiat world.

Pre-sale

It’s another tool in crypto marketing — essentially the early sale of cryptocurrency before the official ICO launch. In this case, presale tokens are typically offered to project developers, crypto marketing companies, and major market players, including investment groups. They might also be given to global influencers like Elon Musk and others.

As a result, participating in a presale can provide highly favorable initial conditions for a new crypto project. It's the next stage of an airdrop, focusing specifically on engaging a target audience.

To participate in a presale, you should thoroughly explore online resources like CoinMarketCap or CryptoTotem. These platforms always offer a list of cryptocurrencies preparing for presale, allowing you to stay informed and get involved early.

IDO

IDO (Initial DEX Offering) is the initial offering of cryptocurrency (tokens) on decentralized exchanges (DEX), including Polkastarter or Uniswap. Essentially, an IDO involves the release of tokens, which can represent a wide range of crypto assets — from actual cryptocurrency to virtual art pieces.

An IDO is a form of crowdfunding for new cryptocurrencies. The influx of funds on a DEX is facilitated through liquidity pools. The goal of an IDO is clear — to attract investment for a new crypto project.

ICO

The next stage in crypto marketing is the ICO (Initial Coin Offering). This is similar to an initial public offering (IPO) in traditional finance but within the cryptocurrency ecosystem. ICO organizers issue tokens (cryptocurrency) and distribute them among investors. In turn, investors buy these tokens with the expectation that their rates will increase over time. So, ICO represents a classic method of project investment financing.

P2E

Play-to-Earn (P2E) represents an advanced concept known as ‘Play to Earn.’ This new paradigm combines gambling with the crypto industry based on blockchain technologies. In these online games, players can earn real rewards by completing various tasks, including advancing through levels, winning battles, and more.

Technologically, this works as follows: developers create a token, link it to the value of a chosen partner cryptocurrency, and establish liquidity pool conditions. Players can then exchange these tokens for digital assets. This benefits game developers, crypto project owners, and players as well — they don’t just enjoy the game but earn cryptocurrency in the process, too.

M2E

M2E (Move-to-Earn) is a new concept that emerged during the crypto winter of 2022. It builds on the Play-to-Earn (P2E) model and applies it to the real world. The idea is to reward users for outdoor physical activities like running or walking. You download an app that tracks your distance using GPS, similar to a standard running app, and rewards you with special tokens. These tokens can be exchanged for sports accessories or partner cryptocurrencies. This approach not only motivates people to exercise but also promotes a healthy lifestyle.

Conclusion

The idea of cryptocurrency is quite straightforward: it’s truly becoming an alternative to fiat money. It serves as a means of saving, exchanging, and is an excellent multifunctional investment tool. Additionally, it functions as a global payment method for goods and services. Cryptocurrency transcends national boundaries and goes far beyond the virtual world, as evidenced by innovative concepts like P2E and M2E.

Today, mining is evidently a high-tech field where, for purely economic reasons, there is little room for amateurs and even professional solo miners. Successful mining is only possible in pools with high-performance hardware.

Keep in mind that it won’t be long before cryptocurrency firmly establishes itself in our lives, tightly intertwining with traditional financial assets.

FAQ

What is cryptocurrency?

It’s a digital asset created by many independent producers known as miners rather than being issued by central banks or governments.

What is airdrop?

This is the free distribution of digital assets to crypto wallets — either ‘just for fun’ or in exchange for completing simple tasks. This generosity isn't random; it's aimed at promoting a new crypto project within the community.

What is the reward for mining a block in the Bitcoin blockchain?

It’s 3.125 BTC. At the Bitcoin price of $ 61 000 per 1 BTC at the end of August 2024, this amounts to approximately $ 190 000.