There are several ways to mine cryptocurrencies.
Equipment and processes change as new hardware and consensus algorithms emerge.
Typically, miners use specialized computing units to solve complicated cryptographic equations.
We’ll now take a look at some of the most common mining methods.
CPU mining
Central Processing Unit (CPU) mining involves using a computer’s CPU to perform the hash functions required by the PoW model. In Bitcoin’s early days, mining’s costs and barriers to entry were low and its difficulty could be handled by a regular CPU, so anyone could try to mine BTC and other cryptocurrencies.
However, as more people began to mine BTC and the network’s hash rate increased, profitable mining became increasingly difficult. In addition, the advent of specialized mining hardware with greater processing power eventually made CPU mining nearly impossible. Today, CPU mining is likely no longer a viable option, as all miners use specialized hardware.
GPU mining
Graphics Processing Units (GPUs) are designed to process a wide range of applications simultaneously. While they're typically used for video games or graphics rendering, they can also be used for mining.
GPUs are relatively inexpensive and more flexible than the popular ASIC mining hardware. They can be used to mine some altcoins but their efficiency depends on the mining difficulty and algorithm.
ASIC mining
An Application-Specific Integrated Circuit (ASIC) is designed to serve a single specific purpose. In crypto, the term refers to specialized hardware designed for mining. ASIC mining is known for being highly efficient but expensive at the same time. Because ASIC miners are at the forefront of mining technology, the cost of a unit is much higher than that of a CPU or GPU.
In addition, the constant advancement of ASIC technology can quickly render older ASIC models unprofitable and as such, in need of regular replacement. Even with electricity costs excluded, this makes ASIC mining one of the most expensive ways to mine.
Mining pools
Since the first successful miner is granted a block reward, the probability of finding the correct hash is extremely low. Miners with a small percentage of the mining power have a very small chance of discovering the next block on their own. Mining pools offer a solution to this problem.
Mining pools are groups of miners who pool their resources (hash power) to increase their chances of winning block rewards. When the pool successfully finds a block, the miners in the pool share the reward according to the amount of work they each contributed.
Mining pools can benefit individual miners in terms of hardware and electricity costs, but their domination in mining has raised concerns about a possible 51% attack on networks.
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