Cryptocurrency mining

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Cryptocurrency mining —production of cryptocurrency using computer technology.

Technical characteristics[edit]

Mining —is the process of creating new blocks in the blockchain, for which the system gives a reward. New blocks are created by complex cryptographic calculations, for which miners provide their computing power. Initially, mining was a tool for creating new coins in the Bitcoin blockchain, but now it is possible to mine almost all existing cryptocurrencies in this way.

Proof-of-work and Proof-of-stake[edit]

Bitcoin and most other cryptocurrencies use the "Proof-of-work" protocol for mining. This protocol suggests a reward for "Proof-of-work": the miner who has made the calculation to create a new block receives new coins. This approach leads to an "arms race": the miners include more and more capacities in the process, building entire mining farms. Competing with them using an ordinary desktop computer or even a home plant for mining is pointless.

There is another protocol: Proof-of-stake, during operation of which the probability of creating a new block depends not on the capacity of the equipment, but on the proportion of calculation units of their total number, which is owned by the miner. Ethereum plans to switch to the PoS protocol.

Equipment for mining[edit]

CPU-mining. Mining by means of the processor capacity of the personal computer. In the case of popular cryptocurrencies, and especially with bitcoin, this method reduces the chances of creating a new block in the chain to zero.

GPU-mining. A more advanced method of mining using video cards capable of performing complex operations. The efficiency of mining using video cards is much higher than the mining on the processor. It is video cards that become the basis for home mining farms. NVIDIA GeForce GTX 1070 video card has become the most popular model for mining, and NVIDIA GeForce GTX 1080 Ti is the most productive (and most expensive) one.

ASIC-mining. The development of cryptocurrency and mining has logically led to the emergence of equipment designed specifically for these purposes. ASICs (application-specific integrated circuits) usually cost several thousand dollars and require a lot of energy consumption at high performance. They are taken for the equipment of large mining farms. HashCoins, Avalon, BitFury, Bitmain Tech are leading manufacturers of ASIC.

Mining-pools[edit]

As with the development of cryptocurrency, acting alone, it becomes more and more difficult to mine new coins using the PoW algorithm, pools uniting the computer capacity of their participants began to appear to jointly calculate cryptographic algorithms. Each participant of the pool receives a reward depending on the share of his participation in the overall work.

Lease of mining farms[edit]

Another option to make money from mining, without using your computer capacity is to buy a contract with a major mining farm for a year or another period. Depending on the value of the contract, you lease a certain amount of computer capacity of the farm, and all coins minted at these capacities become yours.

Prospects[edit]

At the end of 2017, the situation with bitcoin mining is such that to do it very large investments are required which only large companies or private investors can afford.

At the same time, according to experts, taking into account the dynamics of the courses, it may be profitable for a private person to mine such cryptocurrencies as Ethereum, Monero, Dash, Litecoin and Dogecoin. However, in any case, investments in home crypto farms will be quite large, and the payback period can be quite long.

See also[edit]

References[edit]

https://en.wikipedia.org/w/index.php?title=Proof-of-stake&oldid=794354531

https://en.wikipedia.org/wiki/Bitcoin_network#Mining

https://bitmakler.com/asic