How to Mine Cryptocurrency in 2024 - Complete Guide

Breaking Down Cryptocurrency Mining

We will explore cryptocurrency mining in great detail in this section. Our objective is to set out the mining process in an easy-to-understand manner and help you have a clear picture of the role miners play in any given network.  You can use the information below to select a coin to mine and start mining profitably.

What is Cryptocurrency Mining?

Cryptocurrency mining is the process by which blockchain networks create new coins. Mining only works with PoW blockchains, which use different types of algorithms. The Bitcoin network for instance relies on the SHA-256 algorithm, while Ethereum uses the Ethash algorithm.

Before you decide on mining you need to find out about the mining algorithm as this points to the type of hardware supported on the network. While some cryptocurrencies allow for use of specialised mining equipment called ASICs, others are ASIC-resistant, making it possible to mine with a graphics card. We highlight more on this in one of the sections below.

Anyone can become a miner as long as they have the right mining equipment or the computational power needed to mine a new block on the network.

In mining, special computers, also called miners or nodes, compete to solve difficult mathematical problems seeking out a value that identifies the valid block. The value is a hash (calculation) called a nonce and how long it takes to get one depends on the protocol. Bitcoin takes about 10 minutes, while Ethereum takes about 15 seconds and Ravencoin has a 1-minute block generation time.

Once a miner is the first to find the value, they broadcast it to the network. The decentralised nature of the process requires that a majority of miners verify the block before it is added to the blockchain. The winning miner gets a block reward that releases new cryptocurrency coins into circulation.

Why Cryptocurrency Miners are Important?

From the above section, it is clear that miners play a big role in any PoW blockchain network. It’s not just verifying transactions; their role goes a long way in ensuring the network remains safe and active at all times.

How do miners do this? When verifying transactions, they do due diligence by ascertaining that no block can be added to the blockchain twice. In short, they solve the double-spending problem.

Blockchains make it much easier to prevent this problem. The technology underlying cryptocurrency timestamps each group of transactions before broadcasting them to nodes. Each block also has a hash that contains a timestamp of the previous block, making it difficult for the nodes to send a transaction twice.

To guarantee a higher degree of security, miners verify and validate the transactions before they are formally regarded as part of the continuously growing blockchain.

Miners also secure the network by dedicating their computational power to the blockchain. Note that the number of people (miners) on a network is also essential to its security. In particular, when the number of miners increases, the network enjoys a higher hashrate. A higher network hashrate implies there are adequate active decision-makers who can avert any security risk on the network.

Cryptocurrency Mining Limitations

As noted above, all Proof of Work networks use miners to process transactions and to secure the network. However, different networks approach this critical component differently, with certain limitations in place which you might need to keep in mind before you decide to mine a given coin.

The first limitation is about coin supply and how these coins are released into circulation through mining.

Some coins have a hard cap supply, which means there’s a fixed number of coins that will ever exist. For instance, Bitcoin has a fixed supply of 21 million BTC, which is also copied by many Bitcoin forks. Litecoin is fixed at 84 million; while Ethereum Classic is set to have a fixed supply of 210,700,000 ETC. Others like Electroneum and Ravencoin have limited their total supply to 21 billion coins.

Since some miners can use superior mining devices to earn maximum returns, the capping of coin supply and the halving of block rewards are also designed to create mining difficulty. This means coin supply remains limited despite the efficiency of mining machines and the number of people joining the network.

Technical Aspects of Mining Cryptocurrency Explained

We are going to explain the more technical aspects of crypto mining in this section. Some of the key terms we shall focus on are hashrate and processing power. We shall also help you understand the essence of having a higher hashrate and the resources you need to mine profitably.

Hashrate Simplified for Crypto Mining

• What does hashrate mean?

Hashrate is a measure of the amount of computing power needed to mine a new block of transactions and earn a block reward. It tells you how fast a mining machine can work towards solving a new coin. The machines make several guesses every second, with each calculation called a hash. The hashrate of your computer or mining hardware lets you know how efficient a given CPU, GPU, or ASIC miner, is at completing tasks.

You can also add up individual computing power contributions of miners to measure the total computing power of all participants on a cryptocurrency network. The higher the hashrate the better it is for the network.

• Why is a higher hashrate important?

A mining rig with a higher hashrate packs more hashing power, which means it can mine more quickly and efficiently compared to a machine with a low count.

A higher hashrate of the entire network shows that more miners are active, which has a role in the increase in mining difficulty and thus mining competition. However, the most critical aspect of a higher network hashrate is that more miners equate to better decentralisation. In return, there is better network protection against a 51% attack.

The higher hashrate makes it difficult and highly unprofitable for bad actors to hijack the system, thereby enhancing the network’s security.

• How is hashrate measured?

Hashrate is measured in hashes per second or solutions per second (H/s or Sol/s) on different networks. But what this means is that you are looking at how many calculations you get per second with the hardware you have.

The five common units for measuring this are kilohashes per second (Kh/s), megahashes per second (Mh/s), gigahashes per second (Gh/s), terahashes per second (Th/s), and petahashes per second (Ph/s).

Kilo means 1000 hashes and the number increases to 1 million, 1 billion, 1 trillion, and 1 quadrillion hashes for each of the other four ratings.

When choosing a device for mining, you should consider its hashrate. A machine with the required hashing power increases your chances of making profits.

Also, check on network hashrate as that determines mining difficulty as mentioned above. You can get this information on various block explorer sites, including Blockchain.com, Etherscan.io, and Bitinfocharts.com.

Processing Power: CPU & GPU

When it comes to mining cryptocurrencies, processing power refers to the speed of the mining machine. It is how fast the computer’s microprocessor calculates the maths that leads to finding new blocks and hence block rewards.

The faster, and hence more powerful the processor, the better your chances of finding a new block when competing against other miners.  It may be the reason why you might mine some cryptocurrencies with the central processing unit (CPU) power but not others. For those that you can’t, you probably need a faster processor called the graphics processing unit (GPU).

You could comfortably mine Bitcoin using CPU in the early days, but that is now obsolete and the same goes for CPU mining on most other major networks. The simple explanation for this is that the CPU suits simple math calculations. The alternative is GPU mining, which offers more hashing power and is suitable for complex mathematical calculations.

Today, most miners use GPU mining and application-specific integrated circuits (ASICs), but there was another piece of equipment specifically tailored for crypto mining.

The field-programmable gate array (FPGA) is a mining machine that was designed by miners seeking higher processing speeds but at low power consumption. These customised fixed-function devices are however not common as miners go for GPUs and ASICs.

The ASIC is specifically designed to mine a particular PoW algorithm, with many available for SHA-256. However, other than being expensive, they are not easily accessible to individual miners as manufacturers and vendors prefer large orders.

Hashrate needed to mine cryptocurrency profitably

As you might already have noticed, mining different coins require different levels of hashrate. The difference arises from the fact that network difficulty is not the same. At the same time, the hashrate and difficulty are not static, meaning requirements fluctuate from time to time. 

Also importantly, miners have to follow different consensus rules. The type of hardware also matters, depending on whether the protocol is ASIC-resistant or not.

Overall, you need a decent machine that gives you enough hashrate to mine individually or to get a good share reward from a pool.

Below is an example of a network difficulty chart for Bitcoin, illustrating the adjustments as hashrate increases.

Bitcoin mining difficulty graph. Source: Blockchain.com

DIY Cryptocurrency Mining - How to Get Started

In this section, we will cover what you should do to get started with cryptocurrency mining. Some of the key areas we will focus on are the best hardware and software and the costs you should be prepared to incur.

Best Mining Hardware for Cryptocurrency

As we have mentioned before, you need cost-effective hardware to mine cryptocurrencies. Different cryptocurrencies use different mining algorithms and that too reflects in the mining hardware.

For Bitcoin and some select coins, ASIC miners are the best as they offer the highest power and are efficient. However, cost is a key deterrent for new miners seeking to start operations. 

For example, not many can afford the new Bitmain Antminer S19 Pro that packs 110 TH/s, and power consumption of 3250W. This ASIC beast sells at over $18,000 when included with a power supply unit (PSU) and power cords. That’s too expensive, but it’s the best hardware for mining Bitcoin’s SHA-256 algorithm.

When it comes to ASIC –resistant networks, you can only efficiently mine using GPU hardware. Nvidia and AMD graphics cards are the best for mining crypto and are usually used to assemble mining rigs to get the desired range of computational power.

For example, Nicehash offers a customised 10x NVIDIA RTX 3060 Ti mining rig that punches a decent 600 MH/s with only 1400W. A single RTX 3060 goes for about $399.

As you choose a coin to start mining, the first step is to find out what it costs to acquire the hardware.

Other Costs to be Considered

While hardware is considered the most important mining component, you can’t achieve anything without enough power supply. Devices that use more power are more profitable, which means higher costs on electricity and high-end PSUs. 

You also need to consider how much you will pay for electricity, both for running the mining machines and the elaborate cooling system. Note that ASICs may have fans, but you might need to install extra fans for better results, including when you assemble a mining rig.

The best way to cushion against the extra costs is to use cheap electricity and use miners with the highest efficiency possible.

Start Mining!

Once you have the hardware set up, you are a step away from mining cryptocurrency. The next step is to download compatible mining software.

If you are a Windows user, download a Windows-supported software miner, likewise for Linux and Mac. You could also mine some coins using your Android mobile phone, which then calls for mobile-supported software.

We have also mentioned that you might need to join a mining pool. Select one and proceed to configure your mining software, connecting your hardware to the pool and the network you wish to mine. If you have the wallet set up, software configured, and hardware powered up- start mining.

Mining Solution/Services

Mining has become too complex on some networks that the best alternative for most people is to join mining pools. A mining service or provider makes it possible for many miners to combine hardware power and to mine cryptocurrency as a single unit with a significantly higher hashrate.

The most important tip when looking to join a mining pool is to ensure you choose the one that guarantees you a reward for your efforts.

One of the factors to consider is the mining fees. The average fee should be 1%. It is important to pay attention to this since you want to save on the costs to increase your earnings.

Server location is also important. When you choose a server that is closer to you, you increase the chances of creating more valid blocks. If the servers are located in a country where electricity is cheap, you have an added advantage in terms of cost reductions.

The mining pool must also be trustworthy. Established pools are often dependable. If you want to join a new pool, research widely to see what the mining community has to say about them.

Moreover, you should consider the payout scheme. Some are geared towards luck, while others even share rewards. Some come with high risks but reward their miners handsomely. So, it’s a matter of your preference.

Other factors you should consider are the pool uptime, minimum payout and total pool hash power.

There are several mining pools to choose from, with top options depending on the coin you want to mine. In this case, do a little research for the coin in question and see which pools are the best for the cryptocurrency. Use the above points to guide you.

What if you want to mine cryptocurrency but don’t want to buy hardware or run it yourself? The answer is to try cloud mining.

A cloud mining service allows you to rent hashrate and mine for a given period as agreed in a contract. It takes away the responsibility of acquiring and running mining machines, with added advantages being that you can mine any coin at a cost you are comfortable with.

However, cloud mining has its fair share of weaknesses that you should pay close attention to before buying the contracts. The prevalence of scams in this industry is worrying. If you fail to do due diligence, you are likely to fall prey to them.

Some cloud miners can also take advantage of your naivety to pay you less than you are worth. Others might terminate your contract as they will. So, it’s important to read all the clauses in your contract before giving your signature.

With that in mind, top cloud mining services on the market to check out include Genesis Mining, HashFlare, NiceHash, and Hashgains. You can also do some research on the specific coin to find which cloud mining service is supported.

Where Can I Save my Coins After Mining?

Before you start mining any cryptocurrency, you need to choose the right crypto wallet. This is where you will receive your block rewards.

You have a lot of excellent options to choose from in the market. However, hardware wallets are the best if you want to securely store your coins. They offer the right balance between convenience and security.

A good wallet will help you keep your newly minted coins safe, but also allow you to send or trade with ease. Here are the top wallets recommended for miners.