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How To Mine Cryptocurrency: A Step-by-Step Guide

13 mins
Fact Checked
by Maria Petrova
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Cryptocurrency mining has become increasingly popular in recent years, with many people looking to profit by mining coins. In this article, we look at how to mine cryptocurrency and the best mining algorithms. Whether you’re a beginner or an experienced miner, read on to learn everything you need about mining cryptocurrency.

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Best platforms to mine cryptocurrency

If you are going to mine cryptocurrency, you will need a trusted platform. Be careful; many malicious platforms will cryptojack your computer and other devices. Here are a few trusted platforms for you to begin your mining journey.

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Free demo account
Mining simulator
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Loyalty program
Cloud mining
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Crypto mining: The future of finance

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Cryptocurrency mining validates transactions and adds new blocks to a proof-of-work (PoW) blockchain network, such as Bitcoin. Miners carry out this process. These are powerful computer hardware to solve complex mathematical equations and earn cryptocurrency units as compensation.

Miners compete with each other to solve equations. The first miner who solves an equation and adds a new block to the blockchain is rewarded with new units of cryptocurrency, which can then be sold or held as an investment.

Mining is an integral component of the cryptocurrency ecosystem, helping to protect and bolster its integrity. It also allows individuals to participate in the market and profit by contributing computing power

Unfortunately, mining can be expensive due to the technical knowledge required and the costs of investing in hardware and electricity.

How do you mine cryptocurrency?

is mining crypto worth it?

Crypto mining can be a source of passive income. However, there are different methods and processes for mining and creating cryptocurrency. 

Before starting to mine crypto, one must research all the costs of the chosen mining process before determining the potential profit. Despite its potential rewards, mining may prove challenging and yield inconsistent profits due to fluctuating crypto prices and energy costs. To maximize success, it’s important to properly configure the mining devices and invest additional funds to keep running an operation smoothly.

Here is a step-by-step guide on how to mine cryptocurrency. This will help you start mining independently, but these general steps may not be suitable for all methods.

1. Choose your cryptocurrency 

Cryptocurrencies have varying mining difficulties, which is the amount of effort needed to mine a block. Competition increases as more miners join the network, increasing hashing difficulty. Conversely, when miners leave the network, the hashing difficulty decreases, making it easier to mine new blocks. 

However, mining conditions are extremely tough for large cryptocurrencies like Bitcoin, making it difficult for individual miners to earn revenue. That’s why it’s common for Bitcoin miners to invest in powerful ASICs and join mining pools to increase their chances of getting rewarded.

Other proof-of-work (PoW) coins that may represent a good option for crypto miners are Dogecoin and Ethereum Classic. The main reason smaller miners might choose altcoin networks is that they are less congested. Furthermore, altcoins may have greater growth potential due to their untapped resources. At the same time, altcoin mining requires less energy consumption since there’s not as much needed computational power.

The downside when mining altcoins is their highly volatile prices. In the worst-case scenario, the protocol could get hacked or abandoned, leaving your tokens worthless. Certain cryptos have become more sought-after, so you may need to upgrade your mining rigs and spend more money than expected. 

2. Choose your mining equipment

Cryptocurrency mining is a form of competition, and miners benefit from having powerful mining hardware as it increases their chances of finding the next block. 

ASIC miners are generally the best option for cryptocurrency mining as they are specifically designed for this task. However, depending on the cryptocurrency’s difficulty and algorithm, GPUs may still be effective on certain networks.

Certain cryptocurrencies, such as those mined with Helium’s radio technology, need specific mining equipment. These devices must be situated in areas with clear, unrestricted access to wireless networks for effective operation. As a result, it’s important to verify that you possess the appropriate hardware required for mining the cryptocurrency you’ve selected.

3. Create a crypto wallet

Coinbase SEC

You’ll need a crypto wallet to receive your rewards when mining cryptocurrency. Some solid non-custodial crypto wallets on the market include Coinbase and Nexo.

LedgerTrezor, and Safepal are all good hardware wallet options.

Once your wallet is set up, you can generate an address to receive and store your digital coins.

4. Configure your crypto miner device

To mine cryptocurrency, you’ll need to download specialized mining software. The most convenient way to access the software is through the official website of the crypto you intend to mine; this guarantees the correct version and helps prevent fraudulent programs.

Most mining software is free to download and use. Many cryptos have multiple software options for various operating systems. Doing Your Own Research (DYOR) before selecting one mining software is always wise.

Establishing a strategy to monitor electricity costs is another necessary component of setting up a mining device. Begin by reviewing past bills and estimating the cost of mining. Unfortunately, due to the high energy consumption from mining rigs, you may spend more on energy than you earn.

It is essential to remember that mining rigs can be noisy and generate heat. Therefore, consider placing them in a secure area with adequate cooling. It might also be a good idea to put them in a place that will not keep anyone awake at night.

5. Join a mining pool

Individual miners have had a slim chance of success. Only one block is mined at a time, and the reward goes to the first miner who finds the correct hash. Despite several powerful ASICs, your share of Bitcoin’s overall hashing power remains small.

Mining pools combine the computing power of many participants to increase the odds of discovering the next block. By joining a mining pool and pooling your hashing power, you could earn more money than if you were mining alone.

Mining pools typically employ a coordinator to organize their miners, thus minimizing the likelihood of mistakes. When the mining pool discovers a new block, they split the rewards between the participants according to their mining power. Usually, mining pools have a small fee, which is subtracted from the reward. 

Types of cryptocurrency mining

crypto mining

Crypto mining can be conducted through several methods, including CPU, GPU, FPGA, ASIC, and cloud mining, each leveraging different technologies for solving complex mathematical problems.

These approaches range from personal computer processors and graphics cards to specialized hardware and remote data center resources, catering to various levels of investment and expertise.

CPU mining

A CPU (central processing unit) is an electronic component that provides processing power for software installed on computers.

CPU mining software such as CPU Miner was once effective for hash rates of 10MH/sec (MegaHashes per second). Unfortunately, due to Bitcoin’s high hash rate, CPU mining became unprofitable. However, some cryptos, such as Monero (XMR), can still use CPU mining. 

Building a CPU mining rig requires key components such as a high-frequency competition processor, sufficient RAM (random-access memory) to support memory channels and bandwidth, a reliable power source, and a motherboard that ensures smooth communication among all the components. Additionally, an air conditioner is crucial to keep the system cool. For CPU mining, individuals can mine solo or enhance their chances of success by joining a mining pool.

Solo miners’ ability to add coins to their wallets depends on the hardware and network hash rates. Before beginning solo mining operations, you must consider the revenue potential against electricity costs and other expenses.

GPU mining

Due to the increasing demand for computational power, CPU mining could not keep up. That’s why graphics processing units (GPUs) have also been used, alongside CPUs, for mining cryptocurrencies. 

GPUs were first utilized for bitcoin mining in October 2010 when mining software for GPUs became available online. 

Over time, this software has been improved and modified for use in various open-source projects. Modern GPUs offer significantly greater performance than 20 KH/s (kilo hashes), with some providing up to 2,000 times the hashing power. 

Furthermore, GPU miners can handle multiple operations in parallel, and some utilize multi-GPU mining rigs for increased output power or hash rates and payouts. Today, you may use GPU mining to mine coins such as Ravencoin (RVN) or Grin (GRIN)

FPGA mining

One of the biggest concerns of cryptocurrency mining is the cost of the mining equipment. Consequently, GPU mining became inefficient due to its high mining costs. This led to a need for machines that could make mining profitable. And field-programmable gate array (FPGA) machines are one solution.

A field-programmable gate array (FPGA) is an electrical circuit that can be programmed to perform specific logical operations and configured to mine a specific cryptocurrency. FPGA miners were less energy-intensive than GPUs, with a break-even cost within two to three years. 

FPGAs are unbeatably fast when it comes to performing hashing calculations compared to any other hardware, with the fastest reaching 25,000 MH/s. Regarding efficiency, FPGAs outpace both CPUs and GPUs when performing these calculations; plus, they require less electricity per hashing unit.

However, the popularity of FPGA mining was short-lived due to the arrival of ASICs, which offer a better ratio between cost and energy efficiency. Furthermore, high-volume GPUs running on more sophisticated process nodes proved more expensive per GH/s than FPGAs could offer. 

ASIC mining

ASIC stands for “Application-Specific Integrated Circuit,” which is a type of chip created for a specific task. 

In the context of crypto, an ASIC miner is a specialized device that employs ASICs to mine proof-of-work (PoW) digital currencies exclusively. These ASIC devices are specifically designed to provide superior performance on large-scale mining operations.

Installing an ASIC miner requires a power supply, followed by internet access, access router, IP address, wallet, and mining pool. 

ASIC-based mining has dramatically increased the total hash rate of the Bitcoin network, making it unprofitable to mine with CPUs or GPUs. 

Unfortunately, there are a few downsides to ASIC mining. The first one is the high barrier to entry because of the high cost of the mining equipment. 

Another downside of ASIC mining is that organizations that possess and maintain many ASIC systems could gain control of the blockchain network. This leaves ASIC-based mining more vulnerable to a 51% attack. 

Also, only Bitmain produces ASIC devices. The manufacturer pre-loads them with an application that allows them to manage the device’s hashing power remotely

Cloud mining

Cloud mining offers individuals a chance to generate cryptocurrency without investing in or maintaining specialized hardware or software. 

This mining solution is a method where miners rent an ASIC machine instead of buying one. Miners pay monthly rental fees, and this scheme offers more accessibility when cryptocurrency prices decline or network mining difficulty increases.

Cloud mining can drastically reduce the cost of hardware and software maintenance for businesses. For many, cloud mining offers an ideal chance for those interested in mining without making a significant upfront investment.

How to start cloud mining

ECOS is a leading cloud mining provider that was established in 2017. The platform has over 90,000 users worldwide. They offer a minimum mining contract of $150, a convenient calculator, and a detailed transaction history. ECOS also offers additional services such as a wallet, exchange, investment portfolios, and savings. 

Bitcoin (BTC), Miner crypto web3 bullish

Crypto mining is legal in most countries. However, its legality may vary from country to country. But generally speaking, if Bitcoin is legal, so is crypto mining. 

In some places, crypto mining may even be encouraged. You must research and comprehend the laws in your location before learning how to mine cryptocurrency. Furthermore, certain cryptocurrencies may have specific rules or mining requirements that should be considered before beginning.

Is mining crypto worth it?

When mining cryptocurrency, factors like price, performance, design, and implementation of mining machines all affect profitability. ASICs have become the benchmark when it comes to bitcoin mining due to their superior performance over other machines. However, their longevity against increasing mining difficulty and improving machines remains uncertain. 

That’s why you have to think about the budget for investing in crypto mining equipment. Or perhaps you want to choose a cloud mining solution such as ECOS. Laptop GPUs are typically less powerful and more expensive than desktop counterparts, making effective crypto-mining equipment necessary to make a profit from mining. 

Remember that cryptocurrency mining requires a great deal of computational energy. The high energy consumption generates a lot of heat, which could eventually damage laptop fans due to the excessive strain placed on them during mining operations.

What’s the future of crypto mining?

Mining cryptocurrency is not just a fun and exciting way to be a part of the crypto world; it’s also a crucial aspect of keeping the blockchain secure and functional. Knowing how to mine cryptocurrency is only one piece of the puzzle. The next is to calculate the potential reward and the costs of maintaining your hardware and electricity bills. 

Yes, costs and risks are involved, and you need some technical knowledge, but don’t let that discourage you. With some research and effort, anyone can start mining cryptocurrency and potentially earn some rewards. Just remember to stay updated on the latest developments in the crypto space. Any new updates may greatly impact the mining process.

Frequently asked questions

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Iulia Vasile
Iulia Vasile is a seasoned professional in the cryptocurrency and blockchain industry, working full-time in the field since 2017. With a background in computer engineering, she has the unique ability to write about complicated topics, including DeFi, NFTs, trading, and AI, in a way that is easy to understand. Iulia learned multiple programming languages while completing her Software Engineering degree in Bucharest at Politehnica University. Iulia brings her expertise and personal...