At first, when someone talks about bitcoin mining or you see it over the internet, you may have envisioned coins being dug out of the ground. But bitcoin is a digital tender that cannot be seen tangibly, so why do we refer to it as mining?
What is Cryptocurrency Mining?
We call it mining because digital currencies exist in protocol design just as gold live underground. Just as we are yet to dig up all the gold, the bitcoin hasn’t been entirely brought to light. 21 million bitcoins will exist in the future according to the bitcoin protocol. The job of the miners is to discover them few at a time.
But, how do miners do this? For building blocks of an endorsed transaction and adding them in the blockchain, they get the bitcoin as a reward. Miners use some resources and procedures to achieve this reward.
At first, they use the CPU and GPU hardware but as technology advances, more option, as the ASIC and cloud mining emerged. Basically, by carrying out processes known as hashing, these tools solve computer algorithms to bring bitcoin to the light. You learn what these tools are and the pros and cons of using them to mine cryptocurrency.
ASIC is an acronym which represents Application-Specific Integrated Circuit. It is a microchip created to achieve complex hashing algorithm in a relatively small amount of time. The ASIC is specialized for a single custom hash algorithm. ASIC is capable of computing hash algorithms at least a hundred thousand times than the CPU hardware. Canaan and Bitmain firm presently design it. It is effectively used to mine two types of cryptocurrency: Litecoa in and Bitcoin.
- It consumes low as compared to other hardware
- The rate of hashing specific coin is substantially high.
- It is much lighter and smaller than other mining hardware
- Its profit margin is high.
- Relatively expensive to set
- A specific application for individual coins
- Cannot be upgraded
- Lifespan is short.
GPU represents Graphics Processing Unit and is video cards. The GPU program is more flexible as compared to the ASIC but less powerful. The GPU in systems aims to provide a seamless flow of video, gaming, and 3D animation. The mining rate of GPU is much faster than that of CPU. You must install at least one GPU in your system to mine coins. Some critical advantage of the GPU is that you can virtually mine many types of coins. The hashing power can be enhanced by installing AMD and Nvidia which are specially developed to provide better graphics.
- Resale value is high
- Easily sourced
- Efficient at complex computation
- Standard hardware
- Not all coins can be mined
- Less powerful than ASICs
- Overall efficiency is less as compared to ASICs
- Consumes high power
- Large equipment is required to mine
The acronym although widely popular stands for Central Processing Unit. At first, when the Bitcoin evolution got started, the only means to mine bitcoin is by using the CPU on Bitcoin core wallet and the computer. The two famous names in CPUs are the Intel and AMD, and you could mine up to 100 coins a day at first. But because of ASIC, it is not possible to mine bitcoin by utilizing the CPU.
Although the CPU was intended to switch between many tasks, CPU is slow compared to GPU and ASIC when it comes to large-scale computation because it has less arithmetic logical units and hash requires proof of work in mathematical calculation. The CPU hardware is capable of mining a variety of cryptocurrency such as Reicoin, Hold coin, Zcash, etc.
- A perfect starting point to begin mining
- Specialized hardware is not required
- Educational experience not required.
- Consistent tear and wear on the CPU
- No longer profitable
- High power running cost
Cloud mining is the use of special cloud services to produce over 1000 altcoins including bitcoin by collecting capacities in their farms and data centers. Cloud mining is a new method of mining cryptocurrency with designed mining pools with a single aim: to gain more revenue by managing equipment by a contractor as compared with the traditional distributed mining. The cloud mining bypass problems on software and technical mechanisms.
- Miners get rid of hardware disadvantage such as electric power.
- High profitability.
- Profits are predictable
- Mining can be carried out on a relatively more significant scale.
- Easy and quick mining scaling
- Might be subject to hacking attacks
- A possibility of a drop of bitcoin price
- The imprudent likelihood of the seller of contracts which may result in scams.
Despite a variety of applications for the Blockchain technology, most of the coins are still based on proof of work in the world of cryptocurrency. Cloud, CPU, ASIC, and GPU all need to be considered as an essential aspect of it. Selecting the mining method to use all depends on many factors and is left for you to make the most profound decision.