Cryptocurrency Mining Basics
Updated April 19, 2020
Mining involves confirming blocks of transactions such that the block can be added to the blockchain. In exchange, miners can earn all or a portion of the transaction fee and a "reward." The amount earned depends on how the mining is performed.
You can mine using your own hardware alone (referred to as "solo mining") or in combination with others also using their own mining rigs (referred to as "pool mining"). Cloud mining, however, involves using the hardware of another person or organization to mine.
The most common types of hardware used to mine are graphics cards (aka "video cards" and often referred to by the main integrated circuit in the graphics card – a graphics processing unit or GPU) and application-specific integrated circuits (ASICs). ASICs are more akin to central processing units (CPUs) in computer systems which are more efficient at performing serial operations, while GPUs are more efficient at performing operations in parallel. Most graphics cards also have ample and fast memory, whereas ASICs do not. These differences between GPUs and ASICs are typically exploited by the creators of the hash algorithms used by cryptocurrencies to make it more difficult to mine cryptocurrency using ASICs. This in theory will reduce mining power consolidation or mining centralization by helping smaller miners with personal computers (PCs) compete with larger miners and centralized mining pools (having access to many computer systems), thereby helping to keep the cryptocurrency networks more decentralized. That said, some of the cryptocurrencies using older hash algorithms are mineable using ASICs.
So how should I mine? Should I mine at all? Which cryptocurrency should I mine? Rather than just throw out answers, let’s explore some considerations so that you can decide which option is right for you.
GPU mining requires that you build a computer system (e.g., setup the hardware, install the operating system, etc.). It also requires that you maintain the computer system which can involve dealing with hardware failures, overheating, software issues, and other issues. Remember that this is not a general-use or even gaming system which may be pushed hard for relatively short periods of time, but instead, this is a system designed to run 24/7 at full clip. These systems produce a lot of heat, consume a lot of energy, and can be noisy depending on how you cool them. You must also monitor and track energy usage since this affects profitability.
GPU mining can be performed solo or in a pool. See our Solo Mining Vs. Pool Mining page for more information.
Therefore, GPU mining is not for everyone. If you decide that it is not your cup of tea, cloud mining and ASIC mining (solo or in a pool) are still options.
However, similar to GPU mining, ASIC mining rigs are noisy and produce a fair amount of heat. Some compare their noise level to that of a vacuum cleaner.
Similar to GPU mining, ASIC mining rigs can be used for solo mining or pool mining. See our Solo Mining Vs. Pool Mining page for more information.
If you aren’t comfortable with this or don’t want to ASIC mine for whatever reason, then cloud mining is your only option (assuming you have decided against GPU mining).
Cloud mining is very easy to get into – just sign up and start paying for the service. There are several providers out there that offer cloud mining. Below is a list of the more common ones.
We suggest that you carefully research the cloud mining provider before purchasing. Each provider offers a different set of mineable cryptocurrencies, features, and plans and pricing.
Cloud mining offers several advantages over solo mining and pool mining. It offers higher convenience and lower upfront costs as there is no mining rig to setup and maintain. Energy usage and costs are also not concerns when cloud mining.
However, the downside is that cloud mining is typically less profitable than solo or cloud mining. The cloud mining providers take a cut for their service and have to pay for the mining rigs. And although some report higher earnings using cloud mining, this is likely due to sub-optimal solo or pool mining.
Which cryptocurrency should I mine?
This is a difficult question to answer. Below are some considerations.
Most people choose to mine the most profitable cryptocurrency. See our Most Profitable Cryptocurrency page for more information.
Suitability of existing hardware
Your existing mining rig may limit your options. You are likely familiar with the cryptocurrencies that can be mined using your rig. If not, we suggest you start by visiting our Most Profitable Cryptocurrency page and the CCPlug.com Mining GPU Selector for GPU mining rigs.
Decision to perform a specific type of mining
Not all cryptocurrencies are suitable for all types of mining. You will need to determine which cryptocurrencies are compatible with your selected mining type(s).
Decision to support a specific cryptocurrency
Some people want to support a certain cryptocurrency for ideological or other reasons. So you may decide to mine a cryptocurrency even though it is not the most profitable.