Cryptocurrencies are those decentralized digital currencies. While their value is highly volatile, on average, the price has rewarded many early adopters. As a result, many more are trying to enter the bandwagon.
The first cryptocurrency, is the Bitcoin that was released in early 2009. Since then, many other cryptocurrencies, including similar ones, have crept into the market. Initially, mining doesn't require that much power and resources, but as cryptocurrencies become popular, problems started to happen.
For newcomers in mining cryptocurrencies, it has become increasingly difficult because more powerful hardware is needed. And this result to more electricity consumption.
To discover coins, new miners need to invest in expensive hardware dedicated for the task. The choice is either they need to invest heavily to mine high valued coins, or opt to switch to other easier ones that require less computing power.
The whole focus of mining is to accomplish the following three things:
- Provide bookkeeping services to the coin network. Mining is essentially computer accounting called 'verifying transactions'.
- Get paid a reward for your accounting services by receiving fractions of coins.
- To get maximum revenue, initial and personal costs down should be kept at a minimum.
Related: The History Of Bitcoin
In order to mine the cryptocurrency of your choice, you need to have at least the following:
- A private database called a coin wallet. This is a password-protected container that stores your earnings and keeps a network-wide ledger of transactions.
- A mining software package.
- A membership in an online mining pool, which is a community of miners who combine their computers to increase profitability and income stability.
- Membership at an online currency exchange, where you can exchange your virtual coins for conventional currencies, and vice versa.
- A reliable internet connection. And the faster the connectivity the better.
- Dedicated hardware setup that is dedicated for mining. The more powerful, the better.
- A graphics processing unit (GPU), or a specialized processing device called a mining ASIC chip to provide the accounting services and mining process.
- A place that is well-maintained. Mining generates a lot of heat, and sufficient cooling will ensure the hardware components work as intended.
- Staying up-to-date with the cryptocurrency and blockchain technology advancements and trends.
Set Your Expectation
Cryptocurrency is seen as a hype. But because many people have been rewarded handsomely, more people are trying to be part of it. The technology that underlies cryptocurrencies, the blockchain technology, is seen as something that can decentralize the economy because no government, banks or person can control it.
Here, you need to have a reasonable expectation.
If your goal is to earn substantial amount of money, like for a second income, it's wiser if you purchase the cryptocurrency of your choice rather than mining it, in the hopes that it will increase in value like gold or silver bullion. But if your objective is to make a few digital money and spend them somehow, then mining could be your choice.
As a miner, you need to be patient and smart. And remember to do your research to avoid scams.