Cryptocurrencies are in for the long haul no matter how strong governments fight or try to regulate it.
What does it mean to mine cryptocurrencies?
Cryptocurrency mining is process of adding new transaction blocks to already existing blocks in the distributed network. When a new block is added, the miner who successfully added it to the blockchain receives a reward in the cryptocurrency, thus introducing new cryptocoins to the system. The reward you receive depends on the cryptocoin mined.
What you need to know and the steps to take
Mining Requires Effort And Expenses. Mining cryptocurrencies is not a casual undertaken, the idea may appear simple but in practice it requires a lot of work and skills. You will need to invest a lot of money into buying equipment which you will also have to upgrade regularly. Mining requires a significant tech knowledge, you stand to benefit more if you already have good experience in the area of computer hardware and encryption.
Select a Cryptocurrency. The ease or difficulty in mining depends on the cryptocoin you selected. Obviously for economic reasons, the difficulty in mining is made to be directly proportional to the value of the cryptocurrency. The more a cryptocoin is worth, the more difficult it is to mine, and vice versa. Your choice of a cryptocoin should depend on how profitable it will be at the end. Once you have selected a cryptocoin, go to their homepage and download their wallet client that will allow you store the cryptocoin on your computer. Once wallet client is installed, it will download the entire blockchain for the cryptocurrency. You also need to download and install the required mining software for the cryptocoin selected.
Decide whether to mine alone or join a pool. A mining pool allows you to join forces with other miners and mine as a group. The reward is usually split among miners in the pool. This allows you to mine without spending much on equipment, cost of electricity and cooling, since these expenses are shared. But beware of scammers.
Choose a mining method. There are basically three ways to mine cryptocoins. CPU mining which relies on the central processing power of your computer, GPU mining relies on graphical processing power and ASIC which is a machine specifically built for mining Bitcoins. The type of mining to use depends on the algorithm the cryptocoin uses. Choose a mining method that favors the algorithm used by the cryptocoin selected.
However, the best way is to understand the reward pattern of the cryptocurrency you selected. This will determine the skills and processing power to invest in it.
Proof-Of-Stake rewards miners according to the amount they have invested on the network. This means that the more cryptocoins you own, the more you can still own by simply leaving the wallet software on your computer open.
Proof-Of-Work rewards miners according to the amount of processing they can do.
Proof-Of-Capacity rewards miners according to how much hard drive space is available on the computer running the mining software.
It is cool if you decide to mine alone, but unless you have a room full of computers with powerful processors and the money to take care of electricity and cooling cost, joining a mining pool will just be the best idea.