Before going into details, it is necessary to clarify the terms used in this industry. The term “to mine cryptocurrencies” is nothing but an analogy to the mining of precious metals such as gold or diamonds. For this reason, people who are involved in “digging” cryptocurrencies are called miners, and the place where this is done is called a mine. In reality, however, the literal act of digging does not take place.
So what is a cryptocurrency miner? It is a machine that has the computing power to solve a complex cryptographic task, namely the hash. Its computation allows a new block to be attached to the cryptocurrency network, or blockchain. However, these blocks are not cryptocurrencies, but merely a space in which transactions can take place. For attaching a new block to the network, the miner gets rewarded with a certain amount of cryptocurrencies.
Choosing a cryptocurrency miner
There are three types of devices referred to by this name. The first is a GPU miner, which is a device with a graphics card. The graphics card processor (GPU) is capable of performing the mathematical calculations needed to calculate the hash function, which is the decryption of the block header.
The central processing unit (CPU) can also perform these calculations. For cryptocurrency digging, however, GPUs are used because they can be combined with each other, increasing the computation speed (hash rate). The advantages of GPU devices also include the ability to reprogram them. This allows a Bitcoin miner to start hosting crypto mining Ether, for example. Due to the increasing hash rate much more efficient application-specific integrated circuits (ASICs) are better. Unlike GPU diggers, they are created specifically for this activity.
ASIC miners are also quieter and smaller. This allows you to put more machines in a smaller area in a mine. Their disadvantage is that they only adapt to one hashing algorithm. This means that the ASIC cannot be reprogrammed and start digging another cryptocurrency with its help.
How to mine cryptocurrencies? There are still copiers that are field-programmable gate arrays (FPGAs). Such a cryptocurrency digger can be reprogrammed and is also smaller and quieter than an ASIC. It also generates less heat. It is also more efficient than a GPU copier, but slower than ASICs. Despite its lower hash rate, its use can be cost-effective due to its lower power consumption.
What does cryptocurrency mining look like?
The first cryptocurrency, Bitcoin (BTC), initially had a very low hash rate. However, this cryptocurrency’s network, or blockchain, was designed in such a way that the difficulty of mining increases over time. As this happens, the reward for the miner decreases, who gets fewer and fewer Bitcoins for decrypting the block header. The same is true for other cryptocurrencies.
For this reason, cryptocurrency mining is now the domain of specialized companies. The mines they own resemble server rooms. Hundreds or even thousands of interconnected miners are placed in halls. Their common hash rate makes it possible to mine cryptocurrencies profitably, even despite the high power consumption.
What cryptos can you mine?
Almost every one of the currently more than 1,500 cryptocurrencies is more or less modeled on Bitcoin. Despite this, however, there are many digital assets that, unlike the pioneering cryptocurrency, cannot be mined.
In addition to Bitcoin, mining currencies include its various forks, or cryptocurrencies created after separating from its blockchain – Bitcoin Gold (BTG), Bitcoin Cash (BCH) and Bitcoin Satoshi Vision (BSV). Cryptocurrencies that are independent of Bitcoin can also be mined – including Ether (ETH), Monero (XMR) and Litecoin (LTC).
Importantly, not all crypto assets can be mined separately. Dogecoin (DOGE) is a perfect example. It is closely related to Litecoin because it was designed based on its code. The result is the need to mine Dogecoin in a process called merged-mining. It involves mining cryptocurrencies simultaneously in two blockchains. In other words, when a new block of the Litecoin network is dug up, another piece of the Dogecoin blockchain also appears.
There are also many currencies whose predetermined amount is immediately issued. So you can only buy them from other holders or trade them on an exchange. Examples of non-mineable cryptocurrencies are Cardano (ADA), Ripple (XRP), Solana (SOL), Polkadot (DOT) and Avalanche (AVAX).
Source: Plato Data Intelligence: PlatoData.io
