Beginners Guide

The Comprehensive Guide to Cryptocurrency Mining

With cryptocurrencies becoming more popular in today’s world, more and more users are becoming involved in this fresh and mysterious blockchain environment every single day.

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Cryptocurrency mining is a method in which a computer performs certain tasks in order to acquire a little cryptocurrency. 

In this article, we will cover the complete guide on the process of Cryptocurrency mining and its overall aspects. Let’s look at this analysis in depth now. 

What is Cryptocurrency mining?

Cryptocurrency mining is the process through which the different transactions between users are checked and added to the public ledger blockchain. The mining process is also responsible for adding new coins into the current circulating supply. 

It is a mechanism in which transactions are checked and applied to the blockchain digital ledger for different types of cryptocurrency. It is also known as cryptocurrency mining, altcoin mining, or bitcoin mining.

Bitcoin is the most common and well-established example of a mineable cryptocurrency, however the fact that not all cryptocurrencies are mineable is worth noting. Bitcoin mining is based on Proof of Work, a consensus algorithm. 

Why is Cryptocurrency mining necessary?

The main goal of mining can be defined as achieving the following:

1) Delivering coin network bookkeeping services; Mining is basically the 24/7 computer accounting process, called “transactions verification.”

2) Have the accounting services pay a small reward by earning percentages of the coins every few days.

3) Keep your personal costs down, including electricity and hardware.

Types of Cryptocurrency mining

There are four general types of cryptocurrency mining which can be described in detail as follows:

1) Cloud mining: In Cloud mining, a specific amount of money is paid to someone to rent out their mining machine called the “rig”. All the earnings made by the rig is transferred to the cryptocurrency wallet throughout the agreed period.

2) CPU mining: The use of the processors to mine cryptocurrencies is called CPU mining. It was quite familiar earlier but it is now used by fewer people. One of the major drawbacks of CPU mining is that it is extremely slow. It is usually not worth it as a result in spending a large amount of money on electricity and cooling and earning very little money in return.

3) GPU Mining: GPU stands for Graphics Processing Units. This type of Mining is well known and the most popular method of mining the cryptocurrencies. The reason for its popularity is that it is both efficient and cost effective at the same time. The graphic cards are used by the GPU rigs to mine cryptocurrencies.

4) ASIC Mining: ASIC stands for integrated Application-specific Circuits. There are special instruments which are specifically designed to perform a particular purpose, such as crypto-mining. They are also a common mining tool, because they produce large quantities of cryptocurrencies.

Cryptocurrency mining Pros and Cons


  • Mining crypto has the potential to earn a significant amount of cash.
  • Miners play a crucial role in assuring the coin’s legitimacy.
  • It is most cost-effective when compared to buying multiple coins.
  • It eliminates the middleman and ensures that crypto coin keeps it in a decentralized nature
  • One can easily start mining as a hobby and earn money


  • Bitcoin mining is complex as it requires thorough knowledge of mining.
  • Mining crypto, especially Bitcoin is an electricity-intensive process
  • Need an impressive array of high-end hardware.
  • The crypto world is covered with scams, some of which affect the mining industry.
  • Given the high costs of hardware, electricity, and cooling means you are paying out more money to mine crypto.

Cryptocurrency mining requirements

There are some requirements for cryptocurrency mining which can be described in detail as follows:

1) Coin Wallet: This is a free, private database or password-protected container. You will store the earnings you make in your coin wallet and use it to keep a ledger of all transactions for the network.

2) Software: You will also need a free software package for mining, which will typically be made up of stratum and Cgminer.

3) Membership: You must also be a member of an online mining pool. A mining pool is a community of cryptocurrency miners who combine computing power to increase income stability and profitability.

4) Internet: You should be connected to the internet 24/7. You need to have good connectivity.

5) Hardware: You should set up your hardware in a cool and air-conditioned space, such as your basement. The hardware should include a custom-built or desktop computer that works well with cryptocurrency mining.

6) Fan: Get a regular house fan to cool your mining hardware because cryptocurrency mining tends to generate heat.

How does Cryptocurrency mining work? 

Step 1: The first step of mining a block is to hash each transaction taken from the memory pool individually.

Step 2: The outputs are then sorted into pairs and hashed again and the process is repeated until “top of the tree” is reached.

Step 3: After every transaction is hashed, the hashes are then organized into something called a Merkle Tree or a hash tree, which is formed by organizing the various transaction hashes into pairs and then hashing them. 

Step 4: The mining method allows miners to keep hazing the block header over and over again, iterating through the nonce until one finally produces a correct block hash in the network miner. 

Step 5: Upon finding a correct hash, the founder node will transmit the block to the network. 

Step 6:All other nodes can search for validity of the hash and if so, add the block to their blockchain copy and move on to mining the next block.

How Much a Miner Earns

Every four years or so, the incentives for bitcoin mining are halved. Mining one block would give you 50 BTC when bitcoin was first mined in 2009. This was halved to 25 BTC in 2012. This was halved again by 2016 to the present 12.5 BTC level. The reward size would be halved again to 6.25 BTC in around 2020.

Cryptocurrency Mining Pools

The pooled mining refers to the approach where different generating clients work together to generate a block and thereafter split the reward from the block. This is done according to the processing power each client contributed.

This approach is designed to reduce the granularity of the reward for generating a block. It also spreads out the reward more smoothly. The only problem with cryptocurrency mining pools is that there have to be rules to ensure that there is no cheating, either on the side of the clients or the servers. 


If you can keep your energy costs low, you should be able to maximize your profits in cryptocurrency mining. On the other hand, if your energy costs are relatively high, it follows that mining might not be the best idea for you.

There is a significant amount of money you can make in cryptocurrency mining. Since the prices of cryptocurrencies tend to keep rising, a good idea would be to hold onto the coins you mine and wait until the price is suitable enough before you sell.

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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