What is Cryptocurrency Mining?
People in the Middle East have not only profited through cryptocurrency trading, they have also earned from cryptocurrencies by “mining” them. The term “mining” is generally used with natural resources like oil and gas when they are extracted from the Earth’s crust for consumption of human and machine resources.
Cryptocurrency mining also operates in a similar way. So what exactly is cryptocurrency mining?
What is Cryptocurrency Mining
When users are engaged in transactions by sending each other crypto assets, there is a need for someone to validate and confirm these transactions. Since Blockchain is decentralized, there is no centralized authority to work on these transactions. Therefore, the onus falls on all the crypto miners of the network.
Cryptocurrency mining refers to minting new cryptocurrencies on a network by validating transactions. As miners spend their time and resources to help mine cryptocurrencies, thus they are paid back by the network in cryptocurrencies.
There are three primary requirements to mine any cryptocurrency. Firstly, you need the hardware to mine it. Secondly, you need to have software known as mining program. Thirdly, you need a crypto wallet to store your cryptocurrency.
Earlier, ordinary cryptocurrencies, especially Bitcoin, could be easily mined through regular PCs as there were only a few miners available. However, the competition has increased and thus mining has also become tougher than before. Thus, gaming PCs and mining rigs are now required to mint the top cryptocurrencies. However, lesser known cryptocurrencies can be still mined through regular PCs.
Alternatives to Traditional Cryptocurrency Mining
As mining difficulty has increased, a great number of people are investing in expensive ASIC miners and GPU to mine Bitcoins and other cryptocurrencies. This has made it harder for people to mine cryptocurrencies who have a low budget and cannot afford costly mining equipments. Luckily, there are other ways to mine Bitcoin.
Firstly, there is a “mining pool”. Mining pool consists of a batch of cryptocurrency miners who combine their computing power to mine cryptocurrencies. As PCs and hardware of several miners are utilized together for mining, it becomes easier to generate rewards in mining pools. The rewards are thus shared among members of the pool.
Electricity is not cheap in the Middle East. The hardware used for cryptocurrency mining like ASIC miners and GPUs are power hungry and thus they require a considerable amount of electricity to mine cryptocurrencies.
This is where cloud mining can come into play. Cloud Mining is the second alternative to traditional mining. The concept behind cloud mining is similar to the cloud computing concept of Software-as-a-Service (SaaS) where a cloud provider provides an application to be used for monthly or yearly rates.
Similarly, in cloud mining one has to contact a cloud mining provider. A contract is signed which allows the user to mine cryptocurrency on remote hardware with a specified hashing rate. However, there is a catch with cloud mining. There have been several cloud mining companies online who have been engaged in scams. Thus, one has to be careful before dealing with a cloud mining provider.
With the basics of cryptocurrency mining, you can now decide whether cryptocurrency mining is a good option for you or you are okay with cryptocurrency trading only. Remember, if you are lacking in budget, then you can always opt for mining pools or cloud mining.