How to Mine Dogecoin In 2021
Mining is central for any cryptocurrency, and Dogecoin is no different. This is a process in which people solve complex mathematical equations to verify all transactions on the network and add newly created blocks. Created by Jackson Palmer and Billy Markus as a joke, the Shiba Inu dog meme crypto is not only secured by the miners, but they are rewarded with newly minted DOGE for every block they create successfully, thus handling coin issuance. Based on the same basic principles as Litecoin, Dogecoin uses Scrypt-based Proof of Work (PoW) consensus.
Breaking Down Dogecoin Mining
Miners play an integral part in the DOGE network, and in this section you will get in-depth detail on how this works.
What is Dogecoin Mining
In fiat-based financial systems, intermediaries such as banks act as relays to move money from one place to another when two parties wish to transact. These banks manage the ledgers in a centralised location, recording every movement. When it comes to issuance, central authorities (i.e. central banks) have total control over the supply, with the ability to print more or less money as they see fit. As such, power over fiat money is consolidated among a powerful few who have the ability to manipulate the system and even block accounts from operating.
As a decentralised digital currency, DOGE is all about diluting this power to the point that no single entity or group has control over others’ finances. It foregoes the need for banks and central authorities, who have a hand in transmission and issuance. Dogecoin does not have an intermediary but instead uses the miners to validate all transactions. They record every valid Dogecoin transaction on their copy of the ledger and transmit it across the network for other miners and nodes to update their records.
A batch of transactions is written in a file called a block, which is created by miners by solving cryptographic problems using computing power. Whoever solves the equation gets the right to create the block. In return for their efforts, miners are rewarded with newly created DOGE tokens.
Why are Dogecoin Miners Important?
In iterations of digital currencies preceding cryptos, the biggest issue being faced was “double spending”, a process in which coins could be duplicated. Think of this as a file on your computer. When you transfer it to someone, you essentially create a copy, and now you both hold one of these. The proper process would be to cut your file rather than copying it. Using the same analogy, now consider the file to be a digital coin. You might be sincere and not send over a copy, but others might not be so honest. Distributed ledgers ensure that when coins are sent by someone, all ledgers are updated accordingly, showing the numbers decreasing in the sender’s wallet and increasing in the receiver’s. This solves the double-spend problem once and for all.
In blockchain networks such as Dogecoin, each group of transactions in a block carries data on the time of transaction. Once the block is mined and the data is broadcasted on the network to other miners, they update their records, thus securing the network against any duplicate transaction, as any fraudulent ones will be identified and not approved.
Since this process involves solving advanced cryptographic equations, miners need to spend a lot of energy on computing power, which translates into expenses. With so much vested in maintaining and updating the network, the miners are compensated for their efforts through the transaction fee and the block creation reward.
Dogecoin Mining Limitations
Created by Billy Markus and Jackson Palmer, initially as a joke, DOGE differs from the mainstream cryptocurrencies by not having a hard cap on the total coins that can ever be created. Where Bitcoin and many others use a deflationary model, DOGE has a 5% inflation rate. DOGE’s initial target market was micro-transactions, such as tips, and the inflation model is designed to keep the value low through dilution. Dogecoin, however, does offer an incentive to miners through the issuance of newly minted DOGE for every successful block created. The current block reward is 10,000 DOGE and is static since February 2018.
In line with the principle of making a cryptocurrency that is easy to use on a daily basis, the block time of Dogecoin is set at 1-minute intervals, in order to allow for rapid transaction confirmations. This means miners can compete to solve the block very quickly and gain rewards. Like other cryptos, DOGE has varying mining difficulty. This means as more miners join the network, the equations required to be solved for each block get tougher. This method ensures that at any given time, the mining power does not increase the speed of block creation, and block time remains at the 1-minute mark. Similarly, if miners leave the network, the difficulty falls to compensate for slowing block generation.
Tip to Mine Dogecoin Efficiently for Greater Profits“ Now that you know the basics behind Dogecoin and the mining process, you can get started on mining. The best options currently are to buy your own mining rig and become a part of a pool or opt for cloud mining. Physical mining consumes a lot of electricity, and that is the main consideration you should look into as your rewards may not be able to cover the cost. On the other hand, cloud mining is just renting computing power, but it carries its own monthly/yearly fee along with other charges. ”
Technical Aspects of Mining Dogecoin Explained
To know if you have (or are renting) the right hardware, you should look into the hashrate that your setup can achieve. Hashrate is the processing power on the network that helps to solve the cryptographic equations for block creation and subsequent rewards. Read on to know how it actually affects your decision on mining DOGE.
Hashrate Simplified for Dogecoin
- What Does Hashrate Mean?
Every block that is produced is written on the blockchain by ‘hashing’, or encrypting, the transactions within it. The higher the hashrate, the more calculations (both successful and unsuccessful) a computer can do in order to decrypt and verify each block. Therefore, hashrate is the measure of a mining machine’s power, and the combined power of all machines on the network is the network’s total hashrate.
- Why is a Higher Hashrate Important?
A computer with a higher hashrate means that it has more chances of solving block creation equations. As more and more computers join the network, the hashrate increases. Dogecoin’s code takes into account the total hashrate committed to the network and adjusts the mining difficulty by increasing the complexity of the encryption.
The hashrate is also important in determining the health of the network and its security. As a blockchain, the Dogecoin network is distributed, and no single authority controls it. To take over the network, a malicious party would need to take over the majority of the computing power (51% at least). A higher hashrate makes it logistically difficult to achieve this; therefore, the more power, the more secure the network is.
- How is Hashrate Measured?
Hashrate is measured in units of thousands (kilohash, megahash, gigahash, terahash) of hashes, or computations, per second. In its initial years, there weren’t so many computers mining, and DOGE was being secured in the megahash range. This meant ordinary computers such as laptops and desktops were capable of mining using their CPUs. As mining got more intense, miners were quick to realise that their graphic cards, or GPUs, could work in a higher computing range, and they quickly shifted to GPU mining.
Over time, the mining moved to Field Programmable Gate Arrays (FPGAs), which were integrated circuits that the owner could reconfigure to perform a variety of tasks with a hashrate just a tad below the terahash range. Eventually, chip manufacturers started offering dedicated mining machines which were built with only mining in mind. Application-Specific Integrated Circuits (ASICs) are the only choice today if one is to mine successfully as the average hashrate of Dogecoin is around 285 terahashes per second.
Processing Power: CPU & GPU
The processing power of any computer is defined as the number of calculations it can perform at any given time. Since a more powerful device will be able to perform more calculations, it will be able to perform more hashes on the Dogecoin blockchain.
As explained before, the initial years of the Dogecoin network had a relatively low hashpower and many modern desktops and laptops were able to successfully mine DOGE. As the competition got serious, GPUs were used and dedicated GPU mining software was released. They were quickly outstripped as FPGAs replaced them, and then finally, ASICs entered the field.
Hashrate Needed to Mine Dogecoin Profitably
As you can see in the graph, Dogecoin’s current total network power is roughly 285 Th/s. With a modern Scrypt-based ASIC mining rig clocking in at around 500-800 Mh/s, you will probably run a loss mining solo. To seriously consider mining for profit, you should either go for your own mining farm (a very expensive option), join a mining pool, or go for cloud mining. You can check with a Dogecoin mining profitability calculator to see which one generates the best return.
Pros and Cons of Mining Dogecoin
DIY Dogecoin Mining - How to Get Started
With mining now understood, you can get down to setting up your own Dogecoin mining. But before you start, you should get to know the mining machines on offer.
Best Mining Hardware for Dogecoin
Though solo mining isn’t practical anymore (unless you are a millionaire and decide to set up your own farm), you can still invest in a rig and make a profit by joining a mining pool. The rule is simple: the more powerful your machine is, the more chances you have of successfully mining a block. Let’s look at a few Dogecoin mining rigs.
If you are on a budget, you should try considering the BW L21. Though the device is outdated, it can still churn out a decent 550 Mh/s. Consuming only 950W of power, you can still run into profits if you join a decent sized mining pool. The L21 was an expensive device when it came out in 2018, costing $2,500, but you can expect to pay $300 for a used machine.
The AntMiner L3++ is another good option for Dogecoin mining. With a higher hashrate of 600 Mh/s, it comes with dual cooling fans and an overall 1kW power consumption. The device can be picked up from Amazon for around $600, and that includes firmware updates and an external power supply.
If you are interested in raking in some serious profits, you should check out the Innosilicon A6+. This rugged machine is designed to touch as high as 2.2 Gh/s and is the most powerful Scrypt miner today. It consumes around 2.2kWh, so if you are interested in buying this miner, do your calculations carefully as it can run up quite an electrical bill. The Innosilicon A6+ doesn’t come cheap, though. The unit is tagged at $3,000 before shipping, and Innosilicon’s website informs us that it doesn’t take orders of less than ten units. That’s an initial outlay of an eye-watering $30,000.
Other Costs to be Considered
Most of the machines that are sold on the market come without their power supply units. So be careful in purchasing, lest you end up with a miner that you can’t even turn on. The power units are not simple ones like on your PC and carry hefty price tags to boot.
Other costs associated with your mining can be your location. If you intend to buy multiple rigs and connect them, you will need additional cooling of the storage area, along with good air filtration. Your electrical supplier may charge you more as your consumption increases, and hotter summers may add in more cooling requirements. You might need to change your internet package or even ISP if the connection isn’t that stable or you start hitting your monthly data limit early on. Remember also that electricity bills will vary between countries, with many countries locating in China to exploit minuscule energy costs.
The further you break down your requirements, the clearer a picture you will have of what profits you can expect.
Now that you are familiar with what kind of hardware you want, let’s finalise the software part, shall we?
Mining software refers to the programs that use your mining machines to compute the calculations, and there are many different packages available on the internet. MultiMiner is a great choice for many as the software works for several different Scrypt cryptocurrencies. CGMiner is also a popular choice. It offers remote access so you can constantly monitor the status of your mining machine. It can also determine if a new block is found by other miners and start computing the next set of calculations to save you time.
Mining pools are an option many people consider. With the mining difficulty rising, having one or a couple of rigs cannot result in a profit. The best solution is to join a mining pool where people connect their mining machines from all over the world and pool their computing power, hence the name.
If you are deciding to join a pool, take into consideration the size and the past success of the group. A bigger pool is reflected through the higher combined hashrate it possesses, and that means the pool has a higher chance of successfully finding a block. If a block is found, the reward is distributed according to the amount of power each member contributes to the pool. For example, if your input is 2% of the total pool hashpower, you get 200 DOGE per block (2% of the 10,000 DOGE block reward). This is a balance you need to find. A bigger pool size does mean higher chances of rewards, but it also means your contribution will correspond to a smaller pool share.
Aikapool is the most popular DOGE mining pool and constitutes 7% of the total hashpower of Dogecoin’s network. Hashwiz is another popular Dogecoin mining pool that has slightly less pool power at 6%. Zergpool and Zpool are other popular choices, but with a considerably lower market share of 2% each.
Mining pools are a great way to increase your profitability. The increased hashrate of Dogecoin means that there is little to no chance of finding block rewards that will offset your investment or the cost of running the mining machines in a solo mining configuration. The ability to network and work as a single unit means mining pools have far greater chances and are the only practical means of mining successfully if you are not planning to run a large-scale mining farm.
The cost of owning and running a mining rig can be high and as a considerable initial investment, many people may not be able to afford setting up despite the good payouts of joining pools. Cloud mining services provide a good alternative where one rents out a rig and its mining power rather than owning one physically.
You basically set up a contract that defines your share of the mining power, with all the physical hardware and its associated running costs taken up by the rig owner. Of course, the rent does include expenses but what you do get is instant access to the rewards earned (if any).
There are different payment and reward methods employed by cloud mining services. The simplest one is Pay Per Share, where you are simply guaranteed a daily payout according to your pool share. This does away with the block rewards and all you get is what you are promised. If the pool does mine a block, you only get what you were promised and not a share in the block on top of this flat rate. This way, you are guaranteed income but at the cost of letting go of your claim to share the full reward attached to the blocks. Full Pay Per Share allows you a higher payout since it incorporates the transaction fee earned too. The most complex payment is Pay Per Last N Shares. Pool contributors are only paid if a block is successfully mined. This reduces the regularity of earnings but offers greater rewards.
Genesis Mining is a favoured cloud mining pool. It has farms spread all over the globe and even offers custom mining plans. Based in Hong Kong, it has been in the business for roughly 8 years and is a reputable cloud mining platform.
Mining Rig Rentals is a US-based cloud mining service that offers many different coins to be mined, and there are numerous Dogecoin mining pools you can select from. It even allows P2P renting of complete rigs.
SkyCoinlab is a Canadian cloud pool that is designed to be as simple as possible. It has a straight forward pricing structure and has no maintenance fee, making it an excellent choice for newbies.
Each service, a pool or a cloud, will have its own intricacies and expenses. For mining pools, you need to set up your hardware and software and then register on the pools through their websites. They will have guides on how to connect to the network.
For cloud mining, it is fairly simple as you only have to select the contract and pay for it. However, the real game is in the details. The contracts are always designed to protect the actual rig owner since they are the ones who put everything on the line and have to pay the running and maintenance costs. In the end, it is all about doing your calculations and homework with as much detail as possible. Never choose a deal that seems too good to be true; the cloud mining industry is, unfortunately, full of scam artists who target your digital assets and personal information. It's worth doing plenty of research before pulling the trigger.
Where to Save my Coins After Mining
Depending on the type of mining you are doing (solo, pool, or cloud), you will be rewarded in DOGE, another crypto, or even fiat money. If DOGE is the payment method, you will of course need a Dogecoin wallet to save your earnings.
If you are a hodler, you might want to look into using cold wallets such as hardware or paper-based ones. On the other hand, if you intend to regularly liquidate your earnings or trade often, consider using an cryptocurrency exchange wallet so you can cash it out. Below is a list of the best DOGE wallets so you don’t have to waste time searching for a suitable option.