How to Mine Monero In 2021
Decentralised in nature, blockchain networks such as Monero do not rely on authorities such as banks to conduct transactions on behalf of account holders. This is the job of Monero miners. Monero uses a Proof of Work (PoW) mechanism, which entails miners using computers to solve advanced mathematical problems in order to validate transactions and add new XMR coins to the network. Unlike other cryptocurrencies, Monero is designed to be ASIC-resistant, and therefore no special equipment is required for it.
Breaking Down Monero Mining
If you are interested in mining Monero, you will first need to understand what mining is, how it is done, and why the network needs it.
What is Monero Mining?
Like any other cryptocurrency that uses Proof of Work (PoW) consensus, Monero requires digital mining operations for the network to remain secure and running. Differing from traditional money, cryptos do not have any issuing authority, and neither do they need banks or other institutions to keep records of transfer of value.
This is instead achieved by miners. Guardians and maintainers of the Monero network, these people validate all transactions within the network. Validated transactions are noted down in digital files called blocks. The blocks are created by the PoW method, which requires miners to solve complex puzzles to reach the answers. When miners are able to solve the problem, they gain the right to append the block to the network and are given block rewards in the shape of the newly created XMR tokens.
Why Monero Miners are Important?
Fiat, or traditional forms of money, are controlled by banks, and as custodians, they can play with your wealth, and there’s nothing you can do about it. Central banks issue new bills, and they can print as many as they want, creating a surge in supply and decreasing the buying power of your money. You open up accounts in banks and hand over your money to them, which they invest without your explicit consent in different endeavours to generate profits. They can limit the amount of money you can withdraw and even suspend your account, leaving you at their mercy.
Miners replace these institutions and authorities. Simply put, miners are the backbone of Monero. They give the green light to transactions, enabling the exchange of value on the blockchain. Miners solve the equations for the creation of new blocks, propagating the network, and the resultant block rewards add in the crucial supply of new coins.
Then there’s the problem of double-spending, which miners overcome. Previous iterations of digital monies had troubles handling duplication. Digital in nature, the coins could simply be copied like files on a computer, crashing the whole financial system. Transactions on the blockchain are time-stamped and a set of these is collected into a single block before being shared with other miners. Each newly created block is linked, through cryptography, with the previous one. This creates an immutable chain of blocks (hence the name blockchain) and lets miners determine which transaction is legitimate, noting down the debit and credit in the receiver’s and sender’s wallets respectively, making it impossible for the sender to spend the coins again.
Monero Mining Limitations
Monero was launched in 2014 as a privacy-oriented coin that has a total limit of 18.4 million coins in totality, with 17.8 million already mined. Whereas fiat money has no limit on how many units can be produced, causing inflation, Monero takes the deflationary road and limits what will be in circulation. New XMR coins are minted when miners find a block and are given to the successful miner as a reward. With a block mined every two minutes, this means there is a steady supply of the new coins.
The supply does change, though. In a process called “halving”, the block reward is cut down by 50% after roughly every four years. This puts pressure on the market and results in the demand rising, which leads to an increase in the price of Monero.
You can imagine how this can be attractive to people, and many have joined the Monero blockchain as miners, seeking profits. Monero, however, has a few tricks up its sleeve. The first is the mining difficulty adjustment. Powerful computers introduced by miners mean blocks will be mined faster, but the mining difficulty is adjusted by the Monero code to keep block production time at a constant 2-minute interval. Secondly, Monero developers have constantly been adjusting the code to make it resistant to ASICs so that the network achieves maximum decentralisation.
Tip to Mine Monero Efficiently for Greater Profits“ Unlike other PoW based blockchain like Bitcoin and Ethereum, the Monero community and developers have always resented ASICs (dedicated machines that have been built specifically for being efficient and powerful miners). The best way to mine XMR coins is to use your everyday computer’s processor (CPU) or graphics card (GPU). However, solo mining isn’t profitable, and you will need to either join a mining pool or rent out hash power using cloud mining. ”
Technical Aspects of Mining Monero Explained
Before you decide to start mining your own XMR coins and get your hands on the hardware or mining service, there are a few things that you need to know. Since your machine will be solving mathematical problems in order to receive a block reward, you need to understand some technicalities in order to find the right hardware for you.
Hashrate Simplified for Monero
- What Does Hashrate Mean?
Hashrate is simply the number of calculations a computer can attempt in a set time. The hashrate lets you determine the total computing power committed to the Monero network and the proportion of your contribution, letting you calculate the chances of being the first to solve the equation and receive block rewards.
- Why is a Higher Hashrate Important?
Since hashrate determines how many calculations your device can perform, a higher hashrate means you have more chances of successfully mining a block. At the network level, a higher hashrate results in more difficulty for a miner.
The hashrate is also used to determine the health of the XMR network. To hijack a blockchain system, a miner would need to have a hashrate that places him in the majority (commonly referred to as a 51% attack). A higher hashrate of the network means it is more unlikely that a bad actor would be able to do such a thing. Even if one can do so, hardware and electricity costs will be too high to make it feasible for a high hashrate network.
- How is Hashrate Measured?
Hashrate is measured in multiples of thousands of hashes (or the binary number 1024, to be specific) per second. The most common units are kilohash, megahash, gigahash, terahash and petahash. Over time, Monero has seen several jumps in hashrate, sitting in the Mh/s range for the first 4 years of its existence. As time passed, more miners joined the network and toyed with the Gh/s range before sharply falling back. Currently, the network has around 2.3 Gh/s, far lower than other cryptocurrencies of its size because it doesn’t allow high-power ASICs to participate.
Processing Power: CPU and GPU
Processing power is the ability of a computer or device to do useful work. The higher processing power of a computer means more hashrate.
With an active developer community, Monero codes are constantly being adjusted to make it difficult for FPGAs (Field-Programmable Gate Arrays, which are essentially less sophisticated ASICs) and ASICs to mine the XMR coin. This is a constant war as miners are finding new ways to work around the coders’ limitations and the community is regularly forking the network to shift over to methods that are not fruitful for ASICs.
Initially, this was achieved with the CryptoNight PoW hashing algorithm, which had a significant dependency on RAM latency. GPUs, with a lower amount of RAM, are at a great disadvantage, and since ASICs don’t have any RAM at all, they are extremely slow. The latest algorithm, RandomX, creates a virtual machine, requiring the use of RAM and CPU only, cutting off the higher powered machines from the network forever.
This hasn’t stopped miners from combining their computing power, though. Mining pools have grown, and have achieved large hashrates even with using CPUs alone.
Hashrate Needed to Mine Monero Successfully
Image Source: CoinWarz.com
The ASIC-resistant nature of Monero means that there has never been a huge increase in the XMR hashrate. At the same time, since there are a lot more miners in numbers, the network security is still strong. Monero has a hashrate of around 2.3 Gh/s.
Even the most powerful CPUs of today hardly achieve a couple of dozen Kh/s. Individual mining is possible, but the chances of getting enough successful blocks to offset the cost of running these computers 24/7 are very low. You would be far better off joining a mining pool, where you contribute your hashpower to a shared mining operation and receive block rewards proportional to your share of the pool. This results in you receiving rewards much more consistently than mining solo.
Pros and Cons of Mining Monero
DIY Monero Mining - How to Get Started
Now that you have a good grasp of the concept of mining Monero, the next logical step is to start your own XMR mining. Let’s discuss a few points on the setup that you would need to do so.
Best Mining Hardware for Monero
Since Monero mining is designed to be inefficient for GPUs and completely impossible for ASICs, you have a good chance at running your own XMR mining operation without digging too deep in your pockets. To make a profit, you will still need to invest in a powerful computer that has a good CPU and enough RAM (usually 2 GB dedicated solely to mining). Here are a few of the top CPUs that you might want to consider.
The EPYC 7502P 32-Core 2.5 GHz by AMD is perhaps the best processor you can find on the market that can help you mine XMR. The huge processor has 32 cores and can give you up to 23.9 Kh/s with the RandomX Monero algorithm being run on Linux OS. Available for nearly $2,600 on Amazon, the high speed comes with a price tag to match.
If Linux isn’t your choice of OS, you can always go for AMD’s Ryzen Threadripper 3970X 32-Core Processor, which can mine XMR using Windows at 19.9 Kh/s. At $600 cheaper than the EPYC, you can get this processor for $2,000.
If you are on a budget, the Intel Xeon E5-2670 v3 might be a better option. The processor puts out 11.4 Kh/s, significantly lower than the EPYC, but since it is a discontinued product, you can buy a cheap used one for as little as $133.
Other Costs to Be Considered
While the costs of the processors have their role to play in your financials, there are several other costs that you need to factor in too. As well as the CPU, you will need to source a compatible motherboard, sufficient RAM, a power supply, a hard drive and other parts such as monitors and keyboards to build the whole machine.
Then there are the electrical costs. The machines will of course require power, and so will their cooling systems. You will need to keep the local electrical rates in mind. If you reside in a warmer climate, you might need additional cooling as well.
You will most probably join a mining pool in order to mine XMR successfully. If you do, you will need to factor in membership costs as well.
With the computer all set and ready, all you need now is to install mining software and connect to a pool. You will need to install mining software that will coordinate your processor with the algorithm. You can use XMR-Stak to mine on Linux or Windows machines. The software is one of the most regularly updated Monero kits and can accommodate a wide variety of processors. XMR-Stak is also capable of running GPUs, so if you think you can mine successfully with your GPU, you can simply download this and start mining. Other popular choices include XMRig, MinerGate, and Monero Spelunker.
You can also check out the different mining pools set up for XMR. MinerXR, SupportXMR and XMR Nanopool are just a few of the various options you have. You will need to register on their websites and check out the instructions on how to join their pools. Normally, this consists of you connecting to the network using their IP address, but many pools provide small software kits that make all these connections for you.
Mining pools allow people from all over the world to combine their computing power and act as a single, distributed computer. Members’ chances of successfully solving the Monero puzzles and getting block rewards significantly increases as a result, and miners receive a portion of the block rewards according to their share of the pool’s hashpower.
This can be very effective as solo mining would seldom result in a block reward. These services have their downsides too, such as reduced profits (as the XMR are distributed amongst the participants according to the ratio of their hash contributions). There are also several different payout models used by different pools, which can hamper your profits or increase your risks:
- Pay Per Share (PPS): Pools pay out a set profit according to your pool share, regardless of whether any blocks are successfully mined or not. Though this offers guaranteed payouts, you lose the rights to individual block rewards and transaction fees.
- Full Pay Per Share (FPPS): This is virtually the same as PPS, but with the added benefit of participants earning transaction fees as well. The payouts are lower than PPS, and this is what you will need to consider before joining a pool.
- Pay Per Last N Share (PPLNS): Shifting nearly all the risks towards participants, the pools only share the block rewards that are actually earned. The risks are much higher, but so are the rewards.
MineXMR is one of the largest Monero pool mining platforms. It has a combined hashrate of 730 Mh/s, which is roughly 31% of the whole network’s power today. With over twelve thousand members, it has mined 24,600 blocks so far. You can simply register and follow the instructions to connect your CPU to the network. MineXMR uses the PPLNS model, meaning you only get a share of successful blocks mined. MineXMR does charge a 1% pool fee as well, so make sure that you know that your rewards may be substantially diluted.
People who do not want to invest in mining machines yet still want to earn XMR have another option in using cloud mining services, where they simply buy computing power from mining pools for a selected amount of time. This frees you from the heavy initial investments you would make in buying the different components of your mining rig, the installation, and setting it up. With a rental model, you also do not end up with inflated electrical bills.
Though you save a lot of money when you start cryptocurrency mining, cloud mining is a rental model, and therefore you are constantly paying for your share of the block rewards. Secondly, it is the service provider that is at the most risk, since they have all the hardware and bear the maintenance and running costs. To compensate for this, the cloud mining providers not only have a higher rent than what you might expect but also have clauses where they can forcefully close your contract if they run into losses. Keep a close eye on the contract details if you want to go for cloud mining.
Furthermore, there are many fraudulent providers in the cloud mining industry, and you should always conduct extensive research before signing up. Trustpilot reviews can often be a good indicator of trustworthiness, and if a provider offers too-good-to-be-true returns with little downside, err on the side of caution.
If you do want to go for cloud mining, check out Hashgains. The platform has large pools and offers mining for numerous cryptocurrencies. They have 4 different contracts, the cheapest costing just $39 for two years. This offers you 0.5 Kh/s and costs you $0.05 per day for maintenance. The top package offers you 12.5 Kh/s for $975. They also have custom packages that can come in handy.
Where to Save my Coins After Mining?
Cryptocurrencies like Monero rely on token holders directly dealing with their coins, not through intermediaries like banks. Tokens are stored in ‘wallets’, and you will need one if you want to mine. The payouts and rewards will be sent to your connected wallets, and your choice of Monero wallet is imperative. A non-secure wallet can jeopardise your coins’ security and undo all the hard work and money invested into mining.
To fully secure your operation, make sure you check out our selection of some of the best wallets on the market right now.