To get started in mining cryptocurrency, miners will need the following:
1. A dedicated computer hardware with a GPU or specialized Graphical
Processing Unit chip or an ASIC (Application-Specific Integrated Circuit) computer
2. A way to cool the hardware sufficiently
3. A Continuous Connectivity to the Internet
4. A Cryptocurrency mining software
5. A membership in an online cryptocurrency exchange
6. A membership in an online mining pool
It is important to note that the reward for Bitcoin mining was designed to be
reduced by half once every 210,000 blocks are mined or once every 4 years.
This is called Bitcoin halving. In 2008 the initial Bitcoin mining
reward was 50 BTC. In November 28, 2008 the first halving even took
place which reduced the reward to 25 BTC. Then 12.5 BTC in 2016 and
6.25 BTC in 2020.
This process will continue until 21,000,000 Bitcoin is
mined. The reason behind halving is to reduce inflation of the
cryptocurrency and reduce the rate of which new coins are issued to the market.
Like Bitcoin, new Ethereum (ETH) is created through mining.
Both ETH and BTC network currently uses a Proof of Work (PoWl) mechanism, which
guarantees that miners have to solve complex mathematical problems
before the generation of new blocks, after which they will be rewarded with
the cryptocurrency. Unlike Bitcoin, Ethereum does not have a supply limit.
However, the amount of new ETH released every year can be capped.
Ethereum halving will not happen in the same way as Bitcoin, in terms of
50% cut in the mining reward, and a specific schedule for the halving event.
Ethereum doesn’t foresee the decrease of mining rewards at a particular
point in time, like Bitcoin. However, the mining rewards that the Ethereum
miners earn can possibly be reduced.
Bitcoin would cut in half miners’ rewards every 4 years, at exactly 210,000 blocks. However that is not the case for ETH mining becase Ethereum halving is not pre-determined or
pre-programmed, and the release of new ETH will never stop. Therefore it
does not have the deflationary design of Bitcoin. Ethereum runs in an
inflationary mode, during the nonstop generation of new coins.
Your ability to earn more cryptocurrency as a miner will be determined by a
few key factors. But the most obvious of these are the number of mining
rigs you have operating and how many miners you are competing against.
If you are planning to be a miner, it is important to note that cryptocurrency
mining is highly competitive due to its rise in both popularity and value.
Now the competition includes organizations and companies with more
extensive resources than most individuals can compete with. But don’t let
this discourage you from making your first mining rig! Cryptocurrency
mining in 2021 is worth it and with the right hardware, mining
algorithm, and mining pool it can be proven a very lucrative endeavor!
The verification process encompasses competing with other fellow crypto
miners to “crack the code” by solving complicated math problems using
“cryptographic hash functions”.
So what are cryptographic hash functions? Without going deep in the rabbit hole,
a cryptographic hash function is an algorithm (e.g. a set of procedure
performed by a computer program) that can be executed on or against an
individual data file or a password to produce a unique value called a
checksum. It is synonymous to a human fingerprint.
This is how authenticity of a piece of data that is associated with a block containing the
cryptocurrency transaction data is verified. The first cryptocurrency miner to
solve the math problem or crack the code is rewarded.
WORK PERFORMED
The effort or work performed by cryptocurrency miners consists of the following:
-Verifying and validating new cryptocurrency transactions
-Storing those cryptocurrency transactions and organizing them into a new block
-Adding the new block to the digital ledger’s chain of blocks (the blockchain)
-Broadcasting the new block to the cryptocurrency node network
BLOCK REWARDS
For doing the above work, cryptocurrency miners are rewarded a
transaction fees and block subsidy in the form of small amounts of
cryptocurrency.
A Transaction fees is a small fee paid by each person
spending the cryptocurrency to produce a record in the blockchain by
having the transaction added to the new block. The miner adding the block
receives the transaction fees.
A Block subsidy is a newly created cryptocurrency that is paid to the miner who successfully adds a block to the digital ledger. The combination of subsidy and fees is called a
block reward.
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