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Mining: what it is, its types, and how to make money on it

Mining: what it is, its types, and how to make money on it

There are different ways to make money on cryptocurrencies. Someone simply buys and sells cryptocurrencies on the market, earning income on the difference. Someone invests money in dedicated equipment and starts creating a cryptocurrency, i.e., to mine it. We will discuss the latter method in more detail, starting from the cheapest ways of mining to the most expensive ones.

What is mining

In simple terms, mining means providing the power of one's computer equipment to form a chain of blocks in a particular blockchain, writing transactions in that blockchain. In return for participating in this process, the miner, namely, the owner of the equipment, gets remuneration in coins of the blockchain with which the miner works. In other words, serving the Bitcoin network, the remuneration will come in BTC, for example, and the Ethereum network, the remuneration comes in ETH. In fact, this is the way of cryptocurrency mining or, in other words, its digital issuing. The more powerful equipment is involved in this process, the greater will be the remuneration, and therefore the number of coins received on its owner's wallet. 

Mining can involve various equipment of different capacities such as multicore processors (CPUs), discrete graphics cards (GPUs), and specially designed equipment for mining, called ASIC. There are many types of mining, but today, not all of them are as effective as 4-5 years ago due to the ever-increasing complexity. 

Types of mining

Browser and mobile mining

These are the easiest types of mining that do not require any hardware purchase costs. When using browser-based mining, you need to go to the website of the cryptocurrency or service offering this format; otherwise, you can install an extension in your browser from the store. As long as you are on a website or keep an extension active in your browser, the mining continues. Of course, the earnings will be miserable, but this is quite an acceptable and convenient way for beginners to get familiarized with mining because of the low entry threshold.

As for mobile mining, you need to install a special application like MinerGate, Coinhive Monero Miner (mining Monero cryptocurrency only), NeoNeonMaine, or an analog on your Android smartphone from the Play Market store and start mining coins. Sometimes, such applications are removed from the store, but you can always download the distribution as an apk-file from the developer's website. Important! Download the application only from the developer's website and no other! Otherwise, you can mine, but all the remuneration ends up going to the app developer, not you!  

In this case, you must keep in mind that even the most powerful and modern smartphones will face a huge load on the processor and battery, so it is better to keep the gadget plugged into the outlet and accept the risk of device failure.

Both options, browser-based and mobile mining, won't bring essential profits, but they deserve your attention in some circumstances.

CPU

It is the easiest and most accessible mining option available to everyone. To calculate mathematical problems to form blocks in a blockchain, it is necessary to use the power of processor cores of as advanced a computer as possible. Initially, this method was the most popular and even used to mine bitcoin. Nowadays, due to optimization and modification of algorithms for video cards and ASICs, it has become inefficient and unreasonable to steadily mine cryptocurrencies on processors. In fact, this process is now possible only with a very limited list of coins, the most popular of which is Monero (XMR). It continues to support the RandomX algorithm, which is only effective for processors. Its strategic goal is to get rid of the total domination of high-budget solutions based on graphics cards and ASICs, undermining the principles of decentralization and access to mining for everyone. 

Today, mining on Ryzen processors from AMD is still relevant due to their large cache of the third level. Even more productive are EPYC or Heop processors. But these server solutions are more common in the corporate segment and are less available to ordinary users because of their high cost.

GPU

Mining using discrete graphics cards (processors) replaced CPU-based mining and, over time, seriously overshadowed it. At some points, the popularity of this type of mining reached such proportions that it caused shortages of the most powerful video cards at retail in many countries. The most affected in such situations were gamers who could not always get a new graphics card for the release of the latest version of their favorite game. 

Nvidia and AMD products have always been in high demand among miners. The graphics cards of these brands allowed mining a lot of different altcoins, but Ethereum often took the leading positions.

However, the use of standard video cards for mining purposes often led to their overheating and failure. So, as the complexity of mining increased, the situation required more and more advanced solutions and technologies. These are FPGA and ASIC. 

ASIC

It is a dedicated device solely for mining. It is fully autonomous and does not require any integration with computer motherboards like CPUs and GPUs. The acronym ASIC means application-specific integrated circuit. The solution is designed to work with a specific algorithm. It has high performance, leaving all other types of mining far behind. Only FPGA can compete with ASIC.

FPGA

This is the next generation of devices with low power consumption and higher power characteristics compared to GPUs. The name means field-programmable gate array, a bit comically. The distinctive feature of FPGA is the possibility of reprogramming for the most profitable cryptocurrency for mining. Anyone who knows Verilog or VHDL programming language can reconfigure this device from one algorithm to another within a minute. Sure, you can do the same with CPUs and GPUs using such software as Nicehash. But the FPGA still wins in terms of performance, although it is more expensive.

Cloud mining

This option does not require the purchase of any equipment. To deploy cloud mining, it is enough to rent a virtual server (VPS) from a hosting provider, configure it to mine a certain coin and receive remuneration. The main thing is to choose such a server configuration and cryptocurrency, so that the profit from mining would cover the cost of renting the equipment, bringing not only moral but also material income from this type of mining.

Solo mining or mining in pools?

There is one rule for all types of mining - if cryptocurrency mining in the solo mode (on your own) becomes ineffective, you can always connect to a mining pool and continue to generate profits. 

Of course, in case of solo mining, all the rewards go only to the equipment owner. On the other hand, mining in pool allows combining the equipment capacity of all participating miners, thereby increasing the probability of finding a new block. Although you will have to accept the fact that the remuneration will be divided between all participants of the pool in proportion to the capacity of the equipment involved in mining.

Pros and cons of all types of mining
Each type of mining has its pros and cons. CPU and GPU mining options are the most budget-friendly. They allow you to switch from less profitable coins to more profitable ones quickly and easily, but at the same time these options are not as efficient as FPGA and ASIC.

FPGA is much more efficient than CPU and GPU mining, many times more powerful than video cards, and can compete with ASIC. It allows you to switch from coin to coin, but it requires programming skills and is not a cheap solution. It costs about $4000. Also, vendors do not guarantee it for a long time compared to the GPU, where the warranty can be up to 3 years.

ASIC is a rather efficient solution. When combined into farms, it shows maximum performance and good profitability. It is easy to use and does not require knowledge of programming languages. But the solution is tailored for one algorithm only. It cannot be easily and quickly changed to another one, like in the case of CPUs, GPUs and FPGAs.

Cloud mining has the same performance as CPU and GPU mining but does not require the purchase of equipment. Among the disadvantages is that you will need to pay a monthly VPS rental in a data center.

As for browser and mobile mining, there is no cost to the user, but it is necessary to be aware of malicious websites, bogus browser extensions and viruses lurking inside mobile applications downloaded from unreliable sources.

Other ways to make money:

If mining seems too complicated for you, you can always find a simpler way to increase your cryptocurrency balance: 

Passive investments - adherents of this method buy various cryptocurrencies and expect the price of assets to rise over time, following the HOLD strategy - buy and hold until the price rises even more.

Trading - cryptocurrencies are used for trading on exchanges and various platforms in order to make profits from sale and purchase transactions of assets. It does not differ from normal brokers' activities, except that digital assets are used instead of securities. 

Staking - this method does not require any equipment or special knowledge and is more similar to a bank deposit. You buy cryptocurrency and deposit it to keep the blockchain running, in exchange you get remuneration.  

De-Fi - this method is a lot like stacking, but instead of ensuring that the blockchain works, you put digital coins into a liquidity pool. These pools act as exchangers of some cryptocurrencies for others or as a lender, lending people a loan for a while. You, on the other hand, get a percentage from every transaction. 

Play to Earn - this method allows you to play games and make money from it. Not all games can be played without investment, but you can find some on the market. It is enough to search on the DappRadar website.

 

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