What is cryptocurrency mining?

In financial systems, governments of countries print new banknotes. But digital currencies appear otherwise. Mining is one of the ways to create them.

Сryptocurrency mining is the generation of new coins, which is carried out in process of performing mathematical calculations of hash functions. They are necessary for performing transactions by nodes of the cryptocurrency network. For fast transactions and stable operation of the network is required large processing power.

In most cryptocurrency systems, the number of tokens is fixed and advance determined. But this rule doesn’t apply to all cryptocurrencies. For example, for Ethereum, Namecoin, the final number of tokens is not specified and may increase on demand of the market.

Mining is the process with mathematical calculations. As a result, new information blocks are formed. They are added to blockchain, and created cryptocurrency is transferred to common account. Transactions with existing coins also are processed in this time. Participants of the P2P network check them. After that, checked information is written to blockchain.

During the mining, the last transactions are checked for authenticity and unite into blocks. The participant, who first solves this problem, will receive a reward. This approach was conceived as an incentive for those, who sacrifice processing power of their computers for maintain network and create new coins. This process is based on a cryptographic theory called PoW (Proof-of-Work).

The first time such method was applied with Bitcoin and today most of other crypto currencies works with similar principles. In this the complexity of calculations steadily increasing. This requires a constant increase in processing power of the network. Therefore, users united in pools for rise of efficiency crypto currency mining. Pools are collective networks that consist of individual miners. Their computing capacities  are summarized. After mining of the cryptocurrency, coins are divided among all participants of the pool in proportion to their contribution.

Consolidation of computing capacities around the world and their organization in pools allows the crypto network to acquire greater orderliness. At the same time, the system doesn’t lose decentralization.

Today there are several types of legal mining:

  • Mining with equipment
  • Cloud Mining
  • Web Mining

Let’s consider each of them separately.

Mining with equipment. CPU mining

CPU mining

Сryptocurrency mining is process of carrying out a series of complex calculations for finding hash functions. This process requires considerable processing power. Therefore, today digital currencies are produced using powerful, productive equipment – video cards (GPU) or specialized computing circuits (ASIC-miners).

When the complexity of crypto networks was low, for cryptocurrency mining it was enough to use the usual central processor of PC. But in our time on CPU it is advantageous to extract only some cryptocurrencies. These include Monero, ZCash, Dogecoin, Litecoin, Dash, Sibcoin.

However, CPU is able to decipher the following algorithms:

  • Cryptonight. The algorithm supports cryptocurrencies Monero, Bytecoin, Electroneum, DigitalNote;
  • X11. The algorithm supports cryptocurrencies Dash, Pura;
  • Ethash. The algorithm supports cryptocurrencies Ethereum, Metaverse, Ubiq;
  • Scrypt. The algorithm supports cryptocurrencies Litecoin, Dogecoin;
  • Equihash. The algorithm supports cryptocurrencies Zcash, Komodo;
  • SHA-256. The algorithm supports cryptocurrencies Bitcoin, Bitcoin Cash, Syscoin, Peercoin, Namecoin;

There are several types of CPU mining:

  • Solo Mining is the process of cryptocurrency mining with using own computing capacities without involving other miners;
  • Work through pool is the production of cryptocurrency in the mining pool;
  • A multipool is a server that allows you to mine several virtual currencies and switch between different tokens depending on their profitability;

The choice of CPU for cryptocurrency mining depends on various factors. This process needs to be approached individually. However, it is worth paying attention to the following characteristics: CPU frequency and number of cores. These parameters will determine the speed of cryptocurrency mining. Below is a comparative table of CPU performance.

CPU Hashrate Cores Flows Base frequency Overclocking ability L3 cache TDP
AMD Ryzen Threadripper 1950X Cryptonight: 1280 16 32 3.4GHz 4.0GHz 32MB 180W
AMD Ryzen 7 1800X Cryptonight: 660 8 16 3.6GHz 4GHz 16MB 95W
Intel Pentium G4400 Cryptonight: 62 2 2 3.3GHz N/A 3MB 54W
AMD Ryzen 5 1600X Cryptonight: 503 6 12 3.6GHz 4GHz 16MB 95W
AMD Ryzen Threadripper 1920X Cryptonight: 1068 12 24 3.5GHz 4GHz 32MB 180W
Intel Core i5-7600K Cryptonight: 260 4 4 3.8GHz 4.2GHz 6MB 91W
Intel Pentium G4560 Cryptonight: 65 2 4 3.5GHz N/A 3MB 54W
AMD Ryzen 3 1300X Cryptonight: 270 4 4 3.5GHz 3.7GHz 8MB 65W

(information current for July 2018)

Today, CPU mining has lost efficiency and profitability. There is meaning to mine only new unpopular cryptocurrencies. However, early in the development of cryptocurrency industry CPU mining was very relevant and profitable.

GPU mining

GPU mining is a process of cryptocurrency mining with using graphic processor (GPU) of a video card. For this, miners use a powerful video card on a PC or specially assembled farm of several devices in one system. Video cards handle a huge number of one type operations. The process of cryptocurrency mining has same type of work principle. Therefore, the speed of extraction of digital currency is greater here than on CPU.

The best graphics cards for mining are AMD rx 470, rx 480, rx 570, rx 580 or Nvidia 1060, 1070, 1080 ti. Also suitable video cards AMD r9 280x, r9 290 or Nvidia 1050, but they will not bring large profits.

The comparison of video cards is presented below. The table contains hashrate of the most popular devices and their maximum energy consumption. These indicators may vary form particular model of the video card, its manufacturer, the memory used and some other characteristics.

Video cards Ethash Equihash CryptoNight Energy consumption
AMD Radeon R9 280x 11 MH/s 290 H/s 490 H/s 230W
AMD Radeon RX 470 26 MH/s 260 H/s 660 H/s 120W
AMD Radeon RX 480 29.5 MH/s 290 H/s 730 H/s 135W
AMD Radeon RX 570 27.9 MH/s 260 H/s 700 H/s 120W
Nvidia GeForce GTX 750 TI 0.5 MH/s 75 H/s 250 H/s 55W
Nvidia GeForce GTX 1050 TI 13.9 MH/s 180 H/s 300 H/s 75W
Nvidia GeForce GTX 1060 22.5 MH/s 270 H/s 430 H/s 90W
Nvidia GeForce GTX 1070 TI 30.5 MH/s 470 H/s 630 H/s 135W
Nvidia GeForce GTX 1080 TI 35 MH/s 685 H/s 830 H/s 190W

(information current for July 2018)

On GPU it is possible to extract any cryptocurrency, but performance in different algorithms will differ. Older algorithms are not suitable for this type of mining.

The most popular algorithms for GPU mining are:

  • CryptoNight. The algorithm supports cryptocurrencies Monero, Electroneum, Bytecoin;
  • Equihash. The algorithm supports cryptocurrencies Zcash, Komodo, Bitcoin Gold;
  • Ethash. The algorithm supports cryptocurrencies Ethereum, Metaverse, Ubiq;

The list is far from complete, new projects are appearing constantly.

Experienced miners extract cryptocurrency from created farms. Miner can calculate payback of farms on special online calculators. It is important to note, that increase number of miners led to a deficit of video cards on the market. Due to this, price on graphic cards has increased significantly.

Price on MDA video cards

(price chart on AMD video cards)

Video cards are more suitable for crypto currency mining than processors. However, some CPU still show good results, especially the latest AMD chips.

ASIC mining

Today crypto currency mining became a profitable business with industrial volumes. This was helped by invention of ASIC miner in China.

ASIC (Application Specific Integrated Circuit) is a chip that performs only interpretation of cryptocurrency algorithms. This allows the ASIC to extract of cryptocurrency much faster and better than on CPU or GPU.

ASIC miners are developed for a specific algorithm. At the moment  there are ASIC miners that work with all popular algorithms: SHA-256, X11, Ethash, Scrypt, Equihash, Blake(2b).

ASIC Miner consists of a board, a memory block, a fan, connectors for connecting external devices, case and binding elements.

The first ASICs were compact and connected to the system via usb. Today such devices have already lost their relevance. Modern ASIC-miners are divided into 2 types depending on the size of the device, power and energy consumption: professional and home. Home ASICs are compact, work noiselessly and equipped with a power supply unit up to 600 watts. Professional analogs are more cumbersome and noisy, but they are more powerful and energy efficient.

The table shows ASIC mainers with the most favorable ratio of performance and energy consumption.

ASIC Algorithm Hashrate Energy consumption Cryptocurrency
Ebit E10.1 Miner 18T SHA-256 18 TH/s 1600 Вт Bitcoin, Bitcoin Cash
DragonMint T1 SHA-256 16 TH/s 1600 Вт Bitcoin, Bitcoin Cash
Antminer S9 SHA-256 14 TH/s 1340 Вт Bitcoin, Bitcoin Cash
A6 LTCMaster Scrypt 1,23 GH/s 1500 Вт Litecoin, Verge, Einsteinium
DragonMint B52 Blake2b Miner Blake (2b) 3,83 TH/s 1380 Вт Siacoin
DragonMint B29 Blake256 Miner Blake 256 2,1 TH/s 900 Вт Decred
DragonMint X1 Miner CryptoNight 248 KH/s 490 Вт Monero, Electroneum, Bytecoin
Antminer X3 CryptoNight 220 KH/s 550 Вт Monero, Electroneum, Bytecoin

(information current for July 2018)

Cloud mining

Cloud mining

Cloud mining is the opportunity to extract crypto currency with help processing power of data centers. In this, the user doesn’t need to buy expensive equipment and software. The user can simply buy the power of equipment that is installed in remote centers and extract crypto currency in the cloud.

Miners who connect to the cloud accelerate crypto currency mining and earn on it. Cloud’s services earn on commissions and on rent charges.

The essence of transactions between participants of the mining hasn’t changed. The operation is confirmed when it becomes part of the block. The search for one block doesn’t take much time, thanks to huge capacities and the group of people that united by pooles. Transactions are confirmed in chronological order in network. Exchange or cancellation of transactions isn’t possible.

There are 3 basic forms of cloud mining:

  • Hosting – rent of capacities installed at the supplier;
  • Virtual hosting – rent a virtual server and install own software;
  • Rental of capacity – rent without physical access to equipment and software.

The table presents advantages and disadvantages of cloud mining.

Advantages Disadvantages
The possibility of earning with minimal investment Companies can suspend work or payouts
No need to pay for electricity and watch the equipment Breakdowns in data centers
You can mine several cryptocurrencies simultaneously The risk of hacking and fraud
You can try mining for free in test mode Decrease in profit due to commission payment
You can receive a reward for attracting new users Lack of equipment that can be sold
No noise, dust and excess heat You can’t change the software

Web mining

Web mining is a type of cryptocurrency mining using software that is installed on the site. When downloading the pages of such site, the processor resources are used. It can happen both with consent of the user, and secretly from him.

Advantages of web mining is ease of use and low entry threshold. Special equipment is not required, no installation of any programs. The user just needs to open a website and begin the process of cryptocurrency mining. Most of these services may require you to first register an account. It should be noted that the productivity of web mining is much lower than at of classical mining.

Consider some servers for web mining:

  • FreeBitcoin – provides an opportunity to obtain Bitcoin cryptocurrency directly on the browser page. To working on this service is very simple, you just need to register on the site and go to the mining section;
  • BrowserMine – allows you to generate crypto currency directly in browser window. The users receives cryptocurrency with opening the page;
  • WebMining – the service is similar to the previous ones. But it allows the user to change the power of consumed computing.

Most services use their own cryptocurrency. They don’t occur on popular exchanges. All profit are converted to other cryptocurrencies or payment systems.

In conclusion, it should be said that mining is an interesting investment that will not only make money, but also help development of the cryptocurrency industry through support of the network.

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