Here is everything you want to know about digital currency mining

Here is everything you want to know about digital currency mining

Author: Big Cat in the Coin Circle

In the cryptocurrency circle, many people know more or less about mining. Some have heard that mining is very profitable, while others have heard that mining is a scam. However, they are not clear about some specific details. Today I will write about digital currency mining, hoping to help friends who want to enter this field.

What is Mining?

Simply put, mining is a process of issuing digital currency. By recording blockchain data and broadcasting it, you can get rewards, which are newly issued coins.

There are two main ways to issue digital currency: one is to compete for the right to keep accounts by running a specific algorithm (POW proof-of-work mechanism), and the other is to earn interest by holding digital currency (POS proof-of-stake mechanism).

The principles of mining in these two mechanisms are different, but generally speaking they have the same result that you can get coins as rewards. In addition, there are some other types of digital currency issuance, such as: POC capacity proof, mining through the storage space of the hard disk, but POC has not been widely used yet, so it will not be introduced in detail.

How to mine?

We have already talked about the principles of POW and POS mining. If I want to mine now, I need to prepare the equipment needed for mining.

POW mining: Currently, this type of mining has transitioned from CPU mining to ASIC mining, because professional mining machines are more efficient and can get more rewards. Of course, GPU mining still exists.

Coins of this type include Bitcoin, Monero, Dash, etc. The most commonly used ones include GTX 1080 and 1070, as well as mining machines from major mining machine manufacturers.

POS mining: by staking certain tokens, rewards are distributed according to the time and amount of the staked coins.

There is also a concept called coin-day in POS. Coin-day means that each coin generates one coin-day every day. If you hold 10 coins for 30 consecutive days, then the coin-day is 300. If a new POS block is found, the coin-day will be cleared and the corresponding reward will be obtained.

This type of coins includes ATOM, PIVX, XTZ, etc. There are two ways to participate in this type: 1. Join the network and become a verification node. 2. Entrust coins to verification nodes to receive dividends.

First, since the standards of each project are different, please refer to the specific instructions of the project for detailed explanation.

Secondly, if you plan to entrust your coins to a node, it is best to make a comparison of each node, because the dividend ratios given by each node may be different. For example, there has been a case in the past where a mining pool of an exchange pledged the coins of users in the exchange, but did not distribute dividends to users in the form of the coins themselves, but rather other altcoins.

How to calculate the mining income?

Here we mainly introduce the calculation of mining income of the POW series. The income is equal to the return minus the cost. There are many factors to consider when calculating this type of mining, including the hardware costs such as mining machines, cables, wires, transformers, radiators, as well as electricity costs, network computing power and mining difficulty.

Although there are some profit calculators on the market, they are based on the fixed difficulty and currency price of the day, but these two factors are fluctuating, so the calculated results are bound to be biased. Therefore, it is necessary for those who want to participate in mining to know the calculation principles.

Leaving aside the fixed cost of hardware, the approximate calculation formula is:

Computing power: the computing power of your own equipment

Difficulty: Find the mining difficulty of the current currency based on the block browser

Time: The time range from the start of mining to the calculation time

Block reward: The reward for mining a block.

The profit calculated by this formula is theoretical. In actual operation, it will be affected by factors such as mining pool efficiency and actual computing power. The actual computing power depends on the hardware configuration. The only way to calculate the actual computing power is to connect the machine to the network for measurement.

Running all that hardware isn’t free, and as a miner, electricity costs are a big part of your operating expenses, so it’s important to mine in a place where electricity is cheap.

To calculate the electricity cost, you just need to multiply the time spent on mining by the equipment power and the electricity price.

As an example, a mining rig with four GTX 1070s GPUs will consume around 480 Watts to power the graphics cards, with an additional 50 Watts for the motherboard and CPU, adding up to 530 Watts.

Assume that the electricity cost is 0.3 yuan per kilowatt-hour (kwh) and the mining machine runs for 24 hours. To estimate the electricity cost you need to pay per day, convert watts to kilowatts and multiply it by the electricity cost:

530 W = 0.53 (KW) kilowatts

0.53 KW x 24 hours = 12.72 kWh per day

0.3 x 12.72 = 3.816 yuan

Even if the same equipment is used, projects using different algorithms may consume different amounts of electricity, which is something you must keep in mind when participating in mining.

In addition to the currencies mentioned above, some smart and visionary miners will choose to invest in some newly emerging currencies. The network computing power of these currencies is relatively small and the price will be very low. If the right choice is made, the benefits will be huge.

The above is some basic information about mining. In this field, if the price of coins continues to fall, it will be difficult for miners to continue to operate. Some miners will choose to shut down temporarily. In such an environment, the period for miners to recover their investment will be longer.