What is mining?

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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 called “mining” predominantly because of how any successfully-processed transactions are rewarded with tokens of the system you’re contributing computing resources to…

As can be seen, the “method” of mining has changed over the years. The reason for this lies in the way the process works on a fundamental level.

Specifically, each time you “mine” a “crypto” system, the miner is basically using their computer equipment to calculate the “hash” of a series of “cryptographic” (encryption) transactions.

These transactions are the transactions within the network itself, generated by the way in which you’re able to send “Bitcoin” (or other “currencies”) to different users. The point is that the “hashing” process is the same regardless of which system you end up doing it for, or even which equipment you end up using.

To briefly explain its history, CPU’s were originally used to calculate Bitcoin “blocks”, but as the complexity of the operations increased, people discovered that GPU’s (Graphics Processing Units) were better disposed to handle the “hashing” algorithms required by the various “cryptographic” systems.

From here, other people discovered that you could use FPGA’s (field-programmable gate array) and ASIC’s (application-specific integrated circuit) to create even more powerful hashing systems.

The latter of these (ASIC’s) has actually become somewhat recognizable as the “go-to” method of crypto mining. The various AntMiner systems (the majority of which being USB-powered) have long since taken over as the “default” mining system…

What Is Mining & Why Is It Needed?

Mining is the process through which “blockchain” systems are able to populate with transactions. The way it works comes down to how “blockchain” has been created to be decentralized

Decentralized systems allow users to enjoy peer-to-peer functionality with global data sources. In other words, rather than relying on a central service (such as Google/Faceboook etc), the “blockchain” system gives people the opportunity to use 100’s or 1000’s of servers on a “network” to process any data contained within it.

The point here is that this processing power is not free, or cheap. There needs to be some sort of remuneration which attracts users to actually provide their computing resources for the system – which is where the “mining” ideal came from.

“Mining” was invented by Satoshi Nakamoto (creator of Bitcoin) who developed it as a way to “reward” nodes in the BTC network. Obviously, his idea paid off. The way it works is to provide “free Bitcoin” to anyone who uses their computing resources to determine the result of a hashing algorithm (which in the case of BTC is quite complicated).

The bottom line is the “mining” process is there to provide a “decentralized” application with the ability to manage the various transactions required on its network.

Types Of Mining Equipment

Whilst the process of “mining” the various “tokens” is the same regardless of which type of system you do it on, there are a number of systems which have been created solely to “mine” the various “crypto” tokens that are available.

The point here is that it doesn’t matter if you see someone with a PC/GPU “mining” setup, or a custom ASIC – the way in which the system works is the same (the only difference lies in the speed through which it’s processed).

This means that if you’re interested in how to “mine” the various “crypto” systems, it’s important to discern the various ways through which you can do it. There are several:

PC-based (CPU/GPU)
This is the mst standard form of “mining”, as you can just use over-the-counter PC components for it. Whilst these types of setup work well for many of the smaller “coins”, they’ve been long-since superseded by the ASIC-powered “cloud” mining solutions now dominating the Bitcoin space.
If you are looking at getting into “mining” (in any capacity), you’ll want to look at the above as a major investment. Whilst you may argue that you could end up using the components  yourself, the reality is that they are very highly priced and ultimately become degraded extremely quickly. They’re also power-hungry.

Ultimately, you should consider that if you want to potentially mine “coins” for a crypto system, you should be looking at this as a last-resort (typically if you don’t want to pay for an ASIC or just simply don’t feel they’re worth the price).

The most important element of this setup is having a large array of GPU’s (Graphics Processing Units). You’ll be able to find more specifics online; the point is that if you have them all working from one motherboard, it should work well for you.

ASIC Based (Antminer etc)
The other type of “mining” system is the ASIC. This is a custom chip which has been designed specifically to help users manage the various “hashing” calculations require for systems like Bitcoin…

As mentioned, all the “hashing” algorithms are the same, which means that you’re able to use the ASIC’s for any “crypto” system you want.

The main supplier of these systems is “BitMain”, who produce the “AntMiner” range of ASIC systems. There are many types of “Antminer”, with the ones pictured above being most powerful (have the largest number of chips).

These are left to operate on their own (you just plug them into a power outlet and ethernet port) – to which you’re able to achieve fast “hashing” which is more energy efficient & reliable than the various other systems that may be available.

As mentioned, as a “standalone” mining method, the ASIC is by far the most effective at present. Whilst there are rumours of other systems being developed, this is the most efficient available.

“Cloud Mining” / “Mining Pools” (ASIC)
Finally, the ASIC paradigm has been boosted with “cloud” / “pool” mining. This is where groups of miners are linked together to essentially form a “supercomputer” – allowing for faster and more accurate processing:

Whilst this is the realm of larger operations, as an individual user/investors, you are able to put money into one of these operations in order to enhance your mining capacity. Whether you feel it an appropriate investment is up to you.