Let's talk crypto-mining! Most crypto out there can be "mined" with hardware. That is the process of offering your hardware's processing power and get paid for it in crypto.
So how does it work:
NOTE: If you are not into the details of how it works and just want to read ways to do it, scroll down after the dividing line (This is going to be a long post).
The "Blockchain" is exactly what the word describes: A Chain of Blocks. Blocks contain data (In most cases transactions) and each block is interlinked with it's previous and next block in a sequential order. Each block has a certain capacity and when full (Or partially full) it has the "Chance" to become the next block on the chain.
So what does "mining hardware" (Miners) actually do?
When you click that send button from your wallet to another's wallet, that transaction goes into a pot (Pending transactions) and waits it's turn. Miners pick transactions from the pot and start processing them (Is it a valid transaction, does the sender have the said amount to send (same as banks do).
When it processes a transaction, the miner adds it to the block it created and continues to the next one. Now in all this, a miner also tries to "Solve" an enormous mathematical equation for 3 purposes.
- To minimize the chances of 2blocks being send at the same time (And this happens vvvvery often despite the equation's difficulty)
- To achieve a fair distribution of workload and contribution by each miner
- To achieve the highest level of encryption for security purposes.
Noteworthy that that this equation becomes more and more difficult as the chain grows, for the above mentioned reasons and more, which are outside the scope of this article.
This equation can not be solved by following a formula from a-z otherwise it wouldn't be secure. It is only solved "Backwards". Meaning, the miner "Wild-guesses" the answer and tries to see if it matches the equation by going in reverse.
If a miner, hits the correct answer out of the gazillion possible answers, it validates the equation, encrypts it with the answer itself, and the block it was working on can safely become the "Next block" on the chain. Each new block added comes with a reward for the miner in the form of crypto. When this happens, all the other miners who were working on a block, simply discard everything, and start over!
Moving on, i mentioned the possibility of 2 miners solving the equation at the same time. Yes, it happens more often than not. When this occurs, both validated blocks remain semi-pending, they are both added temporarily on the chain, and miners start building the next block either following 1 or the other. Whichever "next" block comes first, validates both itself and the previous, and this way the longest chain wins. The second is discarded as above said and the work begins again on the valid chain.
These are the mechanics behind blockchain technology ensuring data validity and tamper-proof.
Solo VS Pool mining
The above scenario assumes that each miner works "solo". Of course, as time went by and the difficulty of solving the equation (Finding a block) became enormous, pools of miners got together to combine forces and share the block rewards found based on each participants processing power and work submitted. This way they achieve a more predictable monthly revenue. In other words, "SOLO" is a game of luck, you might find the block in 2 days and get X bitcoin or ethereum or whatever coin you mine, but it could also take a year to get the lucky shot. Pool mining, is as above mentioned, more predictable and with a relatively steady income on a monthly basis (Even daily)
To mine crypto today, you need powerful equipment. A few years ago, mining bitcoin on your home PC could generate hundreds of coins in a day. Then it became a month, a year and so forth. Mining bitcoin or most other major currencies on a home PC today would generate 0.000000000x and would probably spend more electricity than the generated value. Bitcoin especially became so difficult to mine, that it requires specialized equipment, build and programmed specifically for this type of work. These equipment are called "ASIC" machines. On the other side, is the GPU mining rigs (Powerful computers with multiple high-end graphics cards) capable of mining ETH, ZCash, Monero, and hundreds of others.
ASIC VS GPU Miners
- ASIC Can only mine the coin(s) it was developed for, nothing else. e.g. an Antminer S9 can only mine btc or bch that work on the SHA256 algorithm (Minor others - not profitable). A GPU Rig can mine hundreds of coins and several algorithms.
- An ASIC is as simple as plug-n-play. plug a power cord, internet, setup a wallet/pool and off you go. While a GPU Rig, needs hours to set up, assemble, a number of troubleshooting to go through before it is capable of mining.
- Now let's be a bit fair to the gpu rigs again, if hardware failure occurs, the ASIC would most probably need to be returned to the manufacturer (e.g. BITMAIN is in China & USA) for repairs so you would loose a month or 2 until it's back to you, while if a graphics card goes bust, the GPU Rig can continue mining with the rest, and all you need to do is either repair or replace the faulty equipment in due time.
- Lastly, an Antminer S9 is noisy (Sounds like an airplane turbine) while a GPU Miner can live in your living room with very little noise discomfort.
There are a number of other differences, but let's stick to these basics for now and let's talk profitability.
Both ASIC and GPU miners are profitable. Whether one is more than the other depends on market conditions. For example, 12months ago and up to Oct-Nov, GPU Miners where far more profitable than ASIC. Since the BTC price boost, currently ASIC are slightly more profitable than GPUs. Which one will be more profitable tomorrow? "Let me look at my magic prediction ball and i'll get back to you" !!!
We personally favor GPU Rigs, which can be maintained and repaired quickly - rather than sent back to the country of manufacture. Our rigs are monsters which have been generating up to Euro 800 per month using 1300w - roughly the same consumption as the S9 antminer but far more profitable.
OK, enough for today, I'll let you read the above twice and digest.