Three Main Methods for Mining Cryptocurrency in 2024

Many people are drawn by the prospect of making money on the internet. With cryptocurrencies rising in popularity over the past decades, a new avenue for making profits has opened up: cryptocurrency mining. Just as you would mine the Earth for precious metals like gold, you can also mine cryptocurrency platforms to earn rewards. 

To learn more about cryptocurrency mining, keep reading this article. We will talk about what exactly mining is, give a word of caution, and cover the different mining techniques.

Why is cryptocurrency mining important?

To understand why mining is important, you must first understand a problem that is common to all digital currencies: the double-spend problem. This is not a problem that occurs when you’re spending fiat currency (like notes and coins), as you can only spend it once.

For example, if you spend $20 on a meal, you cannot spend the same $20 once again as it has already left your pockets. However, when you spend $20 worth of Bitcoins (BTC) (for example) on a meal, you can clone those $20 and spend them again.

This is where miners come in: they validate the transactions that occur on the cryptocurrency platform (like Bitcoin or Ethereum) to ensure that no user is double-spending their tokens (like Bitcoins or Ether).

How does cryptocurrency mining work?

To mine cryptocurrency, you will need two things: specialized mining equipment and a lot of electrical power. This mining equipment is used to validate the transactions occurring on the platform by solving complicated mathematical problems. The solution to these problems is known as proof of work. If the Proof of Work is correct, the miners are rewarded with cryptocurrency. Learn more about cryptocurrency mining in our knowledge base.

What should you know if you want to mine?

A common misconception about cryptocurrency mining is that it’s easy to make money doing it. This cannot be further from the truth! The reality is that it is extremely difficult to make money by mining. Even if you successfully verify transactions, there still isn’t a guarantee that you will be given a reward. This is because a miner must meet two conditions to earn a reward:

1. They must verify 1MB of transactions. This is known as a block.
2. They must be the first to verify these transactions and complete the proof of work. Hence, thousands of miners compete to submit the proof of work for a particular block of transactions but only one person (or pool) will be rewarded for it.

Moreover, mining is not cheap for two main reasons. Firstly, the equipment that you’ll need (which we will discuss below) is really expensive, generally upwards of $5000. The better you want the quality of your equipment to be, the more expensive it is.

Secondly, the process of solving the mathematical problem takes up a lot of power, which will add to your electricity costs. Clearly, mining is a really high-risk activity: you’ll have to invest a significant amount of money with no guarantee of a return. Hence, if you want to embark on the mining journey, make sure that you can afford to take the risk.

Methods of Mining

Now that we’ve covered the background of cryptocurrency mining, let’s get to how to actually do it. There are several methods that you can use to mine cryptocurrency. Below, we will be talking about three main ones.

ASIC Mining

The full form of ASIC is “Application-Specific Integrated Circuit”. As the name suggests, it is a type of computer that is designed to perform a very specific task. Many ASICs are specifically designed for the purpose of mining, which means that they can be used for only mining and nothing else. Because of their effectiveness, they are one of the most popular methods of mining cryptocurrency.

However, there are some problems with using ASICs for mining. The first is that they lead to inequality in the distribution of mining rewards. This is because they are expensive, so only those miners who can afford to pay for this equipment will be able to mine.

The second problem is the existence of mining farms. A mining farm has thousands of ASICs to maximize the number of tokens mined in a day. Because a farm has far more resources than an individual miner, it can establish a monopoly, making it unlikely for solo miners to win the mining race.

Generally, ASICs are really expensive, costing around $5000 on average. They also consume a lot of power.

Cloud Mining

A potentially less expensive mining approach is cloud mining. This method involves renting out mining equipment, called rigs, rather than paying for it. Therefore, you don’t have to pay the full cost of the hardware or worry about its maintenance. The rigs are kept in the company’s warehouse and if you want to use them, you must first register and then either buy a contract or shares for a particular period of time. 

If you earn a reward from the rigs, the amount will be transferred to your cryptocurrency wallet. Mining farms usually offer these services, as it allows them to earn income in the form of rent. However, the potential downside of this method is that your rewards will be lower as the electricity and maintenance costs are deducted from any rewards you earn.

If you are a beginner to the world of mining and you want to dip your toes without burning a large amount of cash on equipment and electricity, cloud mining gives you a relatively cheap alternative. These services are great if you are not really looking to maximize your chances of winning a reward and just want to get a feel for cryptocurrency mining.

• Check out the cloud mining services of Stormgain and claim your freshly mined crypto after 4 hours.

CPU Mining

CPU stands for the Central Processing Unit. It is a component that provides computational power to your computer, allowing it to perform its tasks. Previously, CPUs were used as mining equipment for cryptocurrencies but they have since fallen out of popularity. One reason why, is because they are much slower than other mining equipment like ASICs. They are also more expensive to maintain. It is generally not advised to try this mining method, as it can also result in other hazards (for example, your computer can overheat within seconds).

Conclusion

There are thousands of miners on cryptocurrency platforms this very second who are trying to verify transactions. If you want to be one of them, it is important that you have some idea of how mining works and the mining methods that are out there, ASIC, cloud and CPU mining being three of them. As with anything, make sure to evaluate the risk before you step into the world of mining.