Mining: what is it?
Mining is the recording of cryptocurrency transactions on the blockchain.
Miners work with powerful dedicated devices and as a reward for their contribution, they get freshly minted coins. In fact, when we talk about mining we also refer to the issuance of new coins on the market.
The blockchain is an encrypted infrastructure, so to add new blocks you need to solve a very complex cryptographic function called hash. That’s why mining needs powerful, energy-intensive computers.
Hosted Mining vs. Cloud Mining: what’s the difference?
Mining today is not very convenient, but let’s see the two most popular options.
These are methods of mining for private users who can not afford all the machinery and resources necessary to make this activity profitable.
When you choose to “be hosted”, you have your own hardware to mine, but the devices are located in a secure facility and monitored 24/7 by a company that provides this service. You don’t have to worry about service interruptions, theft, high temperatures or high energy bills. You usually manage your devices as you wish, without having to worry about the mechanical and thermic maintenance of the devices or manage any support staff.
It’s like putting your expensive sports car in a luxury garage and having someone take care of it for you every day. You enjoy the car, and someone else takes care of it.
Cloud Mining is different from hosted mining. You join a mining pool and receive part of the revenue based on your performance.
Cloud mining certainly saves time, as you don’t need to buy or maintain your hardware. Beware, however, the Internet is full of scammers who try to exploit the lack of information about it to make easy money, so it is advisable to proceed with caution.
A further disadvantage is that you have to pay the costs for the use of the equipment, and in addition, you have little control over how the equipment is used or how effectively it works.
GPU and ASIC: the best hardware for mining
Computers used for mining are usually dedicated and must be powerful enough to support the necessary calculations and mechanical components to be integrated.
These computers must have at least one of these two mining components: a GPU, which is a Graphics Processing Unit, or an ASIC, which stands for “Application-Specific Integrated Circuit”.
GPU Mining: What is it?
GPU mining uses graphics cards such as those commonly used to play on a PC.
- It’s a stable, versatile, and more easily accessible technology than ASICs.
- GPUs have high resale value because they are reusable and adaptable to different uses.
- Hundreds of coins can be mined with the same GPU device.
- A GPU is typically guaranteed for three years, which provides long-term benefits.
- The GPU market is more diverse and competitive.
- It consumes more energy.
- GPUs aren’t as powerful as ASICs.
- It requires large equipment.
- You can’t mine major currencies like Bitcoin or Litecoin.
Examples of coins minable with GPUs: Ethereum, Bitcoin Gold, Monero and Zcash.
ASIC Mining: What is it?
ASIC mining uses a chip that has been specially optimised to mine a single coin.
- This is the latest technology available.
- It provides more computing power with lower power consumption.
- ASICs are smaller and lighter components.
- Provides higher profit margins.
- It can cost a lot.
- It can only mine one currency.
- They typically have a one-year warranty and rarely exceed eighteen months of profitable operation.
- A change in the algorithm of the blockchain can make an ASIC obsolete in a secondo without the possibility of updating.
- There are very few ASIC manufacturers that control the market.
Example of coins minable with ASICs: Bitcoin, Bitcoin Cash, Litecoin and Dash
Since the pros and cons of the two technologies are proportional, the choice depends on the objectives and interests that you want to achieve with mining.
Let’s remember again that the ratio between the investment to start mining and the income generated tends to be unprofitable at this time.