Cryptocurrency mining is a blockchain process through which blocks of transactions are validated and added to blockchains. Miners provide the computing power needed to validate and record transactions, and they get rewarded for each successful block they mine. Crypto mining is crucial to the stability of blockchains and the crypto industry.
There are different types of crypto mining programs, ranging from simple CPU miners to advanced ASIC miners and mobile and desktop mining. Miners must know them to choose the best fit for their mining. In this article, you’ll learn how crypto mining programs and platforms work.
Proof of Work (PoW) Mining
PoW consensus is an algorithm that chooses miners to validate transaction blocks based on the minimum computing power (hashrate) required by the blockchain. PoW is one of the different types of mining crypto processes.
In PoW mining, miners solve a complex mathematical equation after the network receives a list of transactions. The successful miners are pooled, and the PoW consensus mechanism randomly chooses one. Only miners with enough computing power have a chance at mining cryptocurrencies. The PoW miners get rewarded with the coin they mine.
Bitcoin is the best example of a PoW cryptocurrency.
- PoW mining may be expensive for miners as an energy-intensive process that impacts the environment.
- But it maintains the stability of blockchains and may be suitable for miners looking to earn rewards.
Proof of Stake (PoS) Mining
PoS is another types of crypto mining methods, but it is different from the PoW consensus in an important way. The PoS mining algorithm was developed to reduce the energy requirements of crypto mining and improve the process. PoS involves validating and recording transactions by chosen miners based on the funds they have committed (staked, locked up) on the mining platform.
PoS cryptocurrencies usually set a minimum amount for miners to commit, and the algorithm randomly picks from the pool of miners having that minimum amount. The greater the amount, the more chances miners have.
Cardano, Solana, Polkadot, and Ethereum are examples of PoS mining cryptocurrencies.
- PoS mining reduces the energy consumption of mining
- It improves network speed and provides a new way for miners to earn through crypto staking.
- Few cryptos require minimum lockup periods
- Miners with more staked funds may influence mining.
The other types of mining crypto are hybrid systems that combine PoW and PoS consensus mining. In hybrid mining, the PoW miners generate new transaction blocks but do not confirm them. Instead, the PoS miners decide whether to verify the blocks or not. To do that, they need votes. The voting rights are purchased by staking a portion of their tokens.
The PoW-PoS hybrid algorithm then chooses 5 random votes to determine the efficacy of the new blocks. A minimum of three vote affirmations (3/5) are required to add transaction blocks to the blockchain. Miners then get rewarded in a 60% - 30% ratio for the PoW and PoS miner, respectively. The remaining 10% is paid into the blockchain’s development fund.
- Hybrid mining mitigates the weaknesses of PoW and PoS consensus
- It reduces the energy consumption
- It improves mining efficiency.
- It may impair the decentralization of mining.
Espers and VirtacoinPlus (XVP) are two examples of a few cryptocurrencies with hybrid mining systems.
Cloud mining is cryptocurrency mining using remote mining equipment from a third-party cloud provider. Miners purchase mining contracts from the provider and can monitor the performance from a live dashboard.
The cloud providers set up mining rigs remotely in areas with favorable policies, affordable electricity, and a cold climate and then offer mining contracts based on generated hash rates. Clients then purchase these contracts and earn mining rewards based on their performance.
- Cloud mining reduces crypto miners' physical and technical demands as they only need to purchase contracts.
- Cloud mining is cost-efficient
- Cloud mining may be scaled from the provider-side
- Clients have to depend on providers and cannot take independent actions.
Considerations for these kinds of crypto mining include track records, uptime, and contract terms.
CPU mining is the use of computer CPUs to mine cryptocurrencies. CPU mining does not require advanced or special mining hardware; regular computers are enough but miners may use high-performance video cards to improve mining.
The CPU core performs complex mathematical equations, verifies transactions, and facilitates the creation of new coins. Monero (XMR), Litecoin (LTC), Dogecoin (DOGE), and Vertcoin (VTC) are some cryptocurrencies mined on CPU.
- CPU mining is efficient for a wide range of cryptocurrencies
- It is affordable, requiring regular equipment
- It is available to everyone with a computer
- It may be unprofitable due to high electricity tariffs
- It may be unscalable in some situations
- CPU mining is not efficient for some cryptocurrencies like Bitcoin
High-performance CPUs are best for CPU mining to become profitable.
Crypto mining moved to Graphics Processing Units (GPU) due to the performance limits of CPUs. GPUs and other types of crypto mining have higher clocking speeds, typically 80 times more than the average CPU speed. The efficiency of GPU mining is based on the continuous decoding of the different hashes repeatedly, with only one digit changing in each attempt.
This is why GPU mining is more effective than CPU mining. GPUs have more hash rates and perform more work simultaneously than CPUs, thanks to the large number of Arithmetic Logic Units (ALU), which are responsible for performing mathematical computations.
Litecoin (LTC), Monero, Ravencoin, Haven Protocol (XHV), Ethereum Classic (ETC), and Bitcoin Gold are some coins mined with GPUs.
- It is more efficient than CPU mining
- GPU mining is scalable and faster
- GPU mining is more complex to set up than CPU.
- Maintenance and cooling costs are higher.
Application-specific integrated circuits (ASICs) are external circuits designed for a specific purpose -they are not multipurpose and cannot be used for other applications. ASICs are high-performance machines that process data and transactions faster than GPUs and CPUs. ASIC mining is the use of ASIC machines to validate and add blockchain transactions due to the ability of ASICs to overcome the high mining difficulty.
Bitcoin mining moved from CPU and GPU due to the increased mining difficulty, so developers designed ASICs to make these types of cryptocurrency mining possible.
- Highly efficient at mining Bitcoin
- ASIC miners give more value for money
- Stabilizes crypto mining
- The costs may be more than private or small-scale miners can afford
ASICs are widely used in mining hosting service operations for their efficiency and ROI.
Crypto mining is available on computers, desktops, and mobile devices. Mobile mining is the use of low-power mobile applications to mine cryptocurrencies. These types of miners put miners in a pool and use their phone’s processing power to mine cryptocurrencies at a specific hash rate.
Many mobile mining apps exist, such as Pi, Bondex, Remint, and Remitano. Mobile mining apps may also be games that users play to earn cryptocurrency. Although they work, mobile mining is often slower than desktop mining and does not work for cryptocurrencies with high mining difficulties.
- Easy, affordable, and low-power requirements
- Decentralizes mining and attracts many miners
- Easy access to mining pools
- Some users argue that mobile mining reduces the battery life of mobile phones.
- Only low-powered mining apps are supported
Cryptocurrency mining is a crucial blockchain activity for stability, growth, and speed. There are different methods and algorithms to mine cryptocurrencies, from proof-of-work and proof-of-stake to hybrid algorithms. Miners also use cloud and mobile mining, GPUs, CPUs, and ASIC machines.
The different types of crypto mining have advantages and drawbacks, so miners must carefully examine their goals before mining. This will help them create practical plans to set up mining rigs or purchase mining contracts on cloud-hosted platforms.
Future mining machines and algorithms may improve on the current mining output and make mining more profitable.