4 Tips for Understanding the Process of Cryptocurrency Mining

What started at a market value of a few dollars in 2009 has now a total market value of several trillion dollars. We are of course talking about the cryptocurrency market, the one market that has taken the global economy by storm with its steady rise in popularity as well as value. Many people who invested early in the market and held onto their wealth are billionaires now.

These billionaires have inspired millions of investors around the world to invest in the various cryptocurrencies available on the market. If you too want to be one of these investors, we recommend that you click here to get started right away with the process. That being said, there is one more aspect to the cryptocurrency market that is less talked about and that is cryptocurrency mining.

It is necessary that you understand the process of cryptocurrency mining even if you don’t plan on doing it yourself. This will help you get a better understanding of the major cryptocurrencies dominating the market and assist you in making more economical decisions, according to

In this article, we will help you do exactly that by listing several tips that will give you better insights on how crypto mining works. Read the article till the end so that you don’t miss out on crucial details.

Crypto mining has a very specific target function

All the major cryptocurrencies, such as Ethereum and Bitcoin, work on PoW (proof of work) protocols and create their crypto coins with the help of miners. These miners “mine” the cryptocurrency blockchain to bring more BTC and ETH into circulation for users to access, all the while getting hefty transaction fees from the traders who use the crypto for transactions.

To understand the process of cryptocurrency mining, it is crucial that you understand the crucial fact that all crypto mining has a very specific function. This function is to solve complex mathematical equations on the blockchain to arrive at a hexadecimal numerical that lets the miner add another block to the blockchain.

This process is extremely competitive as many miners try to solve the same equation first so that they get the reward for themselves. This process is necessary because it helps secure whatever transactions users make on the cryptocurrency platform. Whenever a user needs to make a trade or a transaction, they pay the miner a certain amount of transaction fee for validating the transaction by solving equations for them.

It is also worth noting that the more miners try to solve one single equation, the more the equation’s difficulty increases leading to a requirement of more computing power. This ensures the regulation of the blockchain and disallows the cryptocurrency from going scarce over time.

Even after all your efforts, mining is still a hit or miss

One of the major problems with the PoW protocol is that only one miner gets to keep the reward for themselves when they successfully arrive at the answer to the equation. This means that any other miner who might be working on the same equation wouldn’t receive any compensation for the reward and will instead get an orphan block that can’t be attached to any blockchain.

Cryptocurrency mining, in essence, is not a calculated endeavor – it is a hit or miss chance that may or may not reward you depending on how close you arrive to the answer. This can adversely affect your chance of success and revenue from crypto mining.

What’s more is that the lesser hash rate your mining rig has, the lesser your chance of actually getting a cryptocurrency coin for yourself and it can be several months or even years before you first arrive at a feasible solution and reclaim your reward.

However, miners have already solved this issue ages ago by creating mining pools. A mining pool is a group of miners that collectively work to find the solution to the equations in order to arrive at the hexadecimal number that lets them add a crypto block to the blockchain network.

Whenever a miner arrives at a solution, they share their reward with the rest of the pool according to their hashrate (the rate at which a miner solves equations). This gives a good chance to miners with a low hash rate of earning a healthy income for themselves with mining. Joining a mining pool has become a necessity if you plan on mining crypto in today’s world.

Mining cryptocurrency means investing in powerful and expensive rigs

Many people don’t realize that mining crypto is not as easy as it seems nor is it cheap to do so. If you want to mine effectively, you require either an ASIC board (for Bitcoin) or a high-end GPU (for Ethereum). In today’s market where there is a global GPU shortage, a high-end GPU, along with a compatible system, will cost anywhere between $1500 to $3000 or even $4000 if you want a decent hashrate for your mining rig.

ASIC boards are more expensive with the oldest and most used ones costing a minimum of $7k all the way up to $20k or even $30k. This is not even considering the power consumption the rig would consume for mining cryptocurrency. Mining cryptocurrency may earn you a healthy income but the upfront costs are huge and something you need to consider before you go down the mining lane.

Crypto mining has its own risks

Last but not the least, crypto mining has several risks of its own. You can end up spending thousands of dollars and getting no return for it for a few years if you mine solo without being in a mining pool. There are also several countries where mining cryptocurrency is considered to be illegal, with the most recent one being China.

Another major problem about the PoW protocol is that it isn’t the most environmental way of earning money. According to recent studies, mining operations around the world consume as much annual energy as the annual power consumption of Sweden which leaves mining with a huge carbon footprint.



There are several aspects to understanding the process of cryptocurrency mining and we hope this article was helpful for providing insights in most of them. If this article was insightful for you, consider following our website for regular updates as it will help us out immensely.