How to start mining?

Within the blockchain network, miners play an important role. In fact, miners are an essential part of the decentralized ecosystem as they verify all transactions that occur on a given blockchain. As a reward for this service, miners receive payment in the form of freshly minted crypto coins.

Because Bitcoin’s first mover advantage, it is one of the most well-known and lucrative coins to mine. For DIY miners, mining for crypto-coins can have hefty start-up costs. That is why it is important to understand what you are doing and how the blockchain works before beginning to mine. Mining is a complex process but understanding how to mine for coins like Bitcoin is a useful first step in understanding how mining work in general. Below is a step-by-step guide to how to start mining.

Understanding mining

It is firstly important to understand that the Bitcoin network compensates Bitcoin miners for their services by releasing new Bitcoins in the form of block rewards. This is true for whichever cryptocurrency you choose to mine for. Therefore, the more computing power you contribute, the greater your reward is. This brings us to the second most important thing to know about mining: it takes a lot of computing power!

Unless you’re computing with specialized hardware you’re likely going to be paying more in electrical bills than you will be earning from mining. However, mining hardware can provide greater computing power to DIY miners. This equipment, known as ASIC (application-specific integrated circuits), helps DIY miners to circumvent high electrical costs and maximize mining profits. Hardware such as AntMiner S7, AntMiner S9, and Avalon6 are popular tools for mining. All three of these options provide competitive price per hash and mitigate some of the electricity costs. This is important to consider because the profit one stands to gain from mining is dependent on hash rates, or the actual processing power of your mining device. Therefore, it is important to consider hash rates when deciding which mining hardware to purchase.

Getting set up for mining

Once you have decided on the mining hardware you must download a mining software. In the case of Bitcoin, the two most popular programs are CGMiner and BFGMiner, but there are many different kinds of mining software available for download. Most coins require a specific software, so make sure you do your research about the software that is most compatible with the coin you wish to mine.

Once you have purchased the hardware and downloaded the software it is recommended you join a mining pool. This is because blockchain puzzles can be very complex so it is unlikely that you will be able to solve them on your own. As the name suggests, a mining pool is a group of machines that pool their resources together to solve blockchain problems. In the case of Bitcoin, mining pools are groups of Bitcoin miners working together to solve a blockchain puzzle. Once the block is solved, all miners share in on the reward. Without a Bitcoin mining pool, you will likely waste time, money, and energy. Put simply, you are far more likely to profit off your mining enterprise if you collaborate with other miners. Examples of pools mining for Bitcoin specifically are p2pool, BitMinter, and CKPool.

The final step to crypto mining is setting up a wallet to store all your coins.  The most common method for storing mined currency is to download a desktop crypto-wallet. Freshly mined coins, such as Bitcoin, are sent to your wallet using a unique address. It is important to make sure that your wallet is secure because wallets are often targeted by hackers. Most users use a two-step authentication process or store the wallet on an offline computer or on a USB. It is also important to remember your key as it is not an option to reset your wallet’s password should you forget. After downloading a wallet, you can store, buy, exchange, and sell your coins using crypto-exchanges such as Kraken or Coinbase.

While mining for cryptocurrencies such as Bitcoin can be lucrative, it is important to remember that mining is intentionally designed to be resource-intensive. More specifically, it is designed this way to slow supply by limiting the number of blocks solved each day. In order to make mining profitable, it is crucial that miners understand the risks, costs, as well as stay up to date with relevant cryptocurrency news – you don’t want to be caught mining for a worthless coin!

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