Cryptocurrency Mining Explained
The process of mining in the Crypto world is a system of processing the various transactions that have been created on a network. It’s predominately called Crypto mining because the transactions processed successfully by the mining system that contributed the computing resources are rewarded with tokens.
Specifically, each time a Crypto is mined, the miners are basically using their computer equipment to calculate the hash of a series of Cryptographic transactions. These encryptions are the transactions within the network itself, generated by the way in which a user is able to send Bitcoins or other Cryptocurrencies to different users. Thus, the hashing process is the same regardless of which system or equipment the miner utilizes.
To briefly explain its history, CPU’s were originally used to calculate Bitcoin blocks, but as the complexity of the operations increased, miners discovered that GPU’s (Graphics Processing Units) were better at handling the hashing algorithms required by the various Cryptographic systems.
In addition, miners discovered FPGA’s (Field Programmable Gate Arrays) and ASIC’s (Application Specific Integrated Circuits) created an even more powerful hashing system, and the latter of these (ASIC’s) has become the most popular method of Crypto mining.
Types Of Mining Equipment
The process of mining the various Cryptos is the same regardless of the different types of hardware systems. There are a number of systems that have been created solely to mine specific Crypto coins and tokens, but there aren’t much variations between the PC/GPU mining rig or custom ASIC setup – the only difference may be the processing speed.
1. PC-based (CPU/GPU)
This is a standard mining system using any over-the-counter PC components:
These types of mining setups work well for smaller Crypto coins and tokens, but they are being quickly replaced by the popular ASIC-powered cloud mining solutions now dominating the Cryptocurrency space. One should note PC-based mining can be very costly, i.e. expensive and degrading computer components and the system is not energy efficient.
The most important element of this mining setup is having a large array of GPU’s (Graphics Processing Unit) processed from one motherboard.
2. ASIC-Based (AntMiner)
The other type of mining system is the ASIC. The custom processing chips are designed to specifically help miners manage the various hashing calculations required, like Bitcoin.
As mentioned, all of the hashing algorithms are the same so a miner is able to use the ASIC system to mine any Cryptocurrency.
The main supplier of these systems is BitMain that produces a range of ASIC systems, like the AntMiner (pictured above) with the most powerful and largest number of processing chips that can operate autonomously by just plugging them into a power outlet and ethernet port. The AntMiner can achieve faster hashing, and may be more energy efficient and reliable than other mining systems. As a standalone, ASIC’s may be the most efficient mining systems available in the market today.
3. Cloud Mining / Mining Pools (ASIC)
Finally, the ASIC paradigm has been boosted with cloud and pool mining. This is where larger mining operations or groups of miners are linked together to essentially form a supercomputer – allowing faster and more accurate hashing at higher capacities.
Cloud Mining is a way to mine Bitcoin and other Cryptocurrencies without the need of owning hardware systems. For example, a miner can purchase some shares of mining power and profit from mining pool offered by a cloud mining service provider. Cloud mining is the most flexible way to mine Cryptos without the need of managing complex hardware systems.
Furthermore, cloud mining or cloud hashing (commonly known as hashing power) runs from a remote data center allowing users to purchase mining power without the hassles of managing energy resources, hosting issues and maintenance upkeep.