You can make money from cryptocurrencies in different ways: speculating on the exchange (buy cheaper and sell dearer), investing, raising funds through ICOs, etc. But one of the most popular ways of earning is mining.
Surely you have heard the word more than once, but each time you did not understand its meaning. This article will tackle what mining is, what is the main idea behind it and will also take a look at mining equipment.
What is mining
Mining is the mining of cryptocurrencies. But for sure this definition does not make any sense to you. So let’s rephrase it a bit: mining is the confirmation of transactions in the Blockchain network.
Transactions are transactions, i.e. the transfer of funds. For example, you transfer some bitcoins to your friend – this is a transaction. Such a cryptocurrency transaction cannot just happen. For the transfer to take place, the transaction must be confirmed. That is exactly what miners do. The process of confirming transactions is called mining.
What is mining about?
Transaction validation is the entry of data about that transaction into a new block. Once the data is entered, the transaction is executed (that is, the transfer is made). Then the next blocks will be formed – but for the next transactions. Built blocks do not disappear, they cannot be changed, they stay forever – this is how a chain (chain) of blocks, or Blockchain, is formed.
Each block is formed by calculating a special key (hash). This key is designed to protect the contents of the block (that is, the transaction data). Due to the fact that there is a key, no one can delete the block or change the information recorded in it.
The essence of mining is that finding this very key is not an easy task. Dozens of miners are fighting for its solution – the first to find a key gets a reward (in the form of a certain amount of coins which participants of a transaction “deposit” as a commission). And the first to find the key is the one with the most powerful mining equipment.
You, too, can start decrypting blocks (i.e. mining) and get rewarded.
What is an ASIC-miner
It is a mining device that performs computational operations in an attempt to find the very key (hash). It consists of the following parts:
- The body. It performs a protective function;
- The power supply unit. It rectifies the voltage and reduces it;
- fans. Responsible for cooling the parts;
- The circuit board. It has all the electronic components: chips, transistors, capacitors.
Can I get rich buying an ASIC miner?
Yes, you can. You need to start the mining process according to the instructions from the manufacturer and then the blocks will be decrypted. The process can go on without stopping, even around the clock. But there are a number of factors that affect the amount of your profit. Here they are:
- hash rate. This is the performance of your equipment, that is, how fast it can “search” for keys (decrypt blocks);
- the size of the block award. The bigger the better;
- power consumption. Your ASIC unit will consume electricity, so you need to pay for the electricity;
- 1 kWh rate. The more expensive electricity is in your area, the less you will earn.
There is another important factor – the current rate of the cryptocurrency. You will receive a reward for decrypting blocks in the corresponding digital currency. And the latter tends to drop in value. If that happens, you will lose money – because sooner or later you will need to exchange cryptocurrency to real money (in order to spend). But it’s not all so terrible: the coin can rise in value – then you will get a big profit.