1. Home
  2.  | 
  3. Glossary
  4.  | What is Crypto mining?

What is Crypto mining?

Glossary

Simply stated, crypto mining means solving complex mathematical formulas to create crypto coins or tokens, by means of hardware or software. With crypto mining, everything is documented on the blockchain. Everything is collected in a ‘block’, which then forms a chain of blocks in line with each other. You must remember that additions can only be made behind the block. Past transactions will always remain a part of the Blockchain and cannot be changed. Incidentally, not only are the transactions stored but also refers to the previous block (the hash): a difficult to crack the mathematical puzzle.

Crypto mining is the most popular method of utilizing blockchain technology to gain a stable source of passive income. Thousands of people improve their personal finance by mining cryptocurrency, and there’s an entire industry dedicated to mining digital currencies like Bitcoin and Ethereum on a mass scale. But what is crypto mining exactly, and why can it be so profitable?

What Is Cryptocurrency Mining?

Crypto mining is a process that allows you to use specialized hardware or software to generate new crypto coins. Crypto miners help verify transactions on the blockchain, and in return they are rewarded with cryptocurrency incentives, enabling them to earn passive income.

Although cryptocurrencies like Bitcoin have a fixed total supply, not all bitcoins that will ever exist are already on the market. New coins are being added to the circulating supply gradually, and mining Bitcoin is a process in which people compete to solve complicated math equations in order to gain new coins.

At first, people could mine all cryptocurrencies using a normal computer or laptop. Although you can still mine some coins on your PC, nowadays most cryptocurrencies require specialized hardware called “crypto miners” or “mining rigs” to mine them.

Mining rigs are powerful machines built with multiple GPUs (Graphical Processing Units). Specialized crypto mining companies own dedicated cryptocurrency mining facilities that host hundreds of crypto miners, but many people are also able to make a profit by owning just a single mining rig in their homes.

However, it’s worth noting that crypto miners require a lot of electric energy to function. Because of that, mining cryptocurrency is not feasible for anyone – in order to truly profit from it, you need to live in a country with cheap electric energy, or you must have access to a source of renewable energy such as wind turbines or solar panels.

For many crypto skeptics, the high energy consumption of crypto mining is an argument against cryptocurrencies in general. However, over 80% of cryptocurrency mining is done using green energy sources, which makes crypto mining one of the most eco-friendly industries in the world.

It’s also worth noting that not all cryptocurrencies can be mined – you can only mine coins built with the Proof of Work (PoW) algorithm, such as Bitcoin (BTC), Ethereum (ETH) and Monero (XMR). Cryptocurrencies that utilize the Proof of Stake (PoS) algorithm cannot be mined.

Is Crypto Mining Profitable?

Many people are discouraged from crypto mining because of the large investment required to start mining cryptocurrency. Some people even claim that it’s very hard to actually make any profit by mining crypto.

It’s true that mining cryptocurrency on your own requires a huge initial investment. Mining rigs are quite expensive, and a single unit can even cost thousands of dollars. Furthermore, you also have to expect paying high energy bills.

In return for that huge investment, you will only receive small amounts of cryptocurrency on a regular basis. Because of that, crypto mining is not for you unless you’re very patient – it may take a couple years before your mining rig finally starts turning in profit!

However, for patient long-term investors, mining crypto can truly be a very profitable enterprise. Cryptocurrency prices keep rising, and the small amount of crypto received regularly will eventually amount to a very considerable sum.

Furthermore, innovative methods of crypto mining such as cloud mining can make mining cryptocurrency much easier and more convenient. In case of cloud mining, you contribute to a professional mining operation, and in turn become eligible to earn a portion of the bitcoins they mine.

Thanks to cloud mining, you don’t have to personally buy and maintain a mining rig – you can outsource it to professionals. You still receive your crypto passive income, but you save the time you would otherwise need to spend configuring and maintaining a mining rig.

Conclusion

Whether you decide to mine crypto in the traditional way by owning your personal mining rig, or whether you prefer to earn passive income with cloud mining, mining cryptocurrency can be very profitable. It requires some patience and you shouldn’t expect to earn a fortune overnight, but if you’re looking for a reliable way to earn cryptocurrency, crypto mining is definitely something that you should consider.

Also good to know

What is a Wallet?

What is a Wallet?

Once you have installed your ASIC miner and connected it to the internet, it is time to start mining cryptocurrency. From here on out it is mostly waiting until you manage to mine some crypto, but a very important aspect to consider before commencing your operation is how you will store the mined cryptocurrency. In this article you will find out what the options are and what the best practices are when it comes to storing cryptocurrencies such as bitcoin (BTC).

read more
10 Tips about Bitcoin Mining

10 Tips about Bitcoin Mining

Mining Bitcoin is a great way to earn blockchain-based passive income. However, some people still think that BTC mining is hard, complicated, and only accessible to computer experts and people with a lot of crypto experience. Fortunately, it doesn’t have to be this way – reading through these 10 tips about Bitcoin mining will let you start mining BTC effortlessly!

read more
Self mining vs Cloud mining

Self mining vs Cloud mining

Mining cryptocurrency is a popular and time-proven method of making money with blockchain technology. Despite the fact that it’s a very reliable way of earning cryptocurrencies, some people consider crypto mining as something that’s far too hard and complicated. Cloud mining is a new type of mining cryptocurrency that aims to be more convenient and accessible. But what is cloud mining exactly, what are the benefits of cloud mining, and how does cloud mining compare to the traditional way of mining cryptocurrency?

read more
Share This