Today, cryptocurrencies have become not only a fashionable trend and an element of pop culture, but also an effective way for additional quick earnings. Along with mass popularization of digital financial assets, non-specific terms began to appear in everyday speech usage, such as: mining, cryptocurrency trading , cloud mining, ICO, forks, tokens, crypto-exchanges, etc.
What do these cryptic words mean and where do the cryptocurrencies actually come from, how can you "mine" a lot of coins, and is it necessary to buy and keep a lot of computer equipment (video cards and "asics") at home – we'll talk about this in this article.
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"Mining" – description of the process
The word "mining" means the appearance and appropriation of financial units of a cryptocurrency (coins) for an individual person or group of people (pool). The process of mining is a method of complex computer algorithmic calculations on specialized equipment or programmed, connected to a crypto-farm, video cards. Why do you need mining? The matter is that the blockchain system is functionally structured so that mining is not only a method for obtaining crypto-coins "from the air" (cryptocurrency emission), but an effective protective and functional process for maintaining the efficiency of the transaction system (transfer of coins) between users. Roughly speaking, the miners are people who use the computing power of computers to create new blocks for fixing committed in the system of blockchain, transactions, and thereby continue the chain of blocks, protecting it from fraud and branching. To the person who first creates a new block in the chain, and transfers information to the nodes (all computers that are on the network), the blockchain system calculates bonus coins.
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The simplest explanation will be a light example – remember the rules of the ticket lottery. Only in the case of mining, the number of tickets is incredibly large, and the winning code is not listed on the ticket. It must be calculated independently by certain algorithmic formulas. The one who first guesses the "winning number", enters into the system the data on transactions implemented in the cryptocurrency network. For this the system rewards the miner with a certain number of coins, that is, the winning lottery ticket receives a prize. Depending on the type of cryptocurrency, the amount of compensation is different (for example, the Ethereum gives 5 Ethers per one filled block in the chain).
It is worthwhile to understand and know that all the cryptocurrencies differ in the frequency of "lottery" (the time interval for which the system generates each subsequent block). In particular, Bitcoin offers a new block approximately once every ten minutes, but the Ethereum is in the interval of less than one minute.
In order to efficiently and quickly calculate complex algorithms of the blockchain system, it is necessary to operate expensive and powerful computing equipment. For the process of mining, it is customary to use video cards or special ASIC devices ("asics" are separate design integration schemes that are designed to calculate the number of "target" for certain types of cryptocurrency). To place at home such a large amount of equipment with a high level of heat emission, at least, is inconvenient. Firstly, it is a constant noise of operating cooling systems (from 70 to 10 dB), and secondly, a lot of occupied space (dimensions of "asics" from 350 x 140 x 150 mm and more), and thirdly, constant heat in the apartment due to the high coefficient of heating capacity of the equipment (700-900 Wh).
Not every miner can live in such truly "infernal" conditions, and money, for the amount of computing resources needed for profitable work, not everyone will have enough (today the average price of one average "asic" is about 2000 dollars, and the purchase of video cards for the "farm" will cost even more). Those who decided to take up mining, but at the same time want to do this with a minimum level of investment and without noise in the apartment - it is important to take an interest in cloud-mining.
Cloud-hashing: specifics, nuances, advantages
The principles and general specifics of the work, cloud mining does not differ from the usual, habitual hashing process. Crypto-coins are extracted according to the same algorithm as in the previous case. The main distinguishing feature of Cloud-Mining is the technique and video cards, the platform for placing the "farm", as well as its technological maintenance – the care of the landlord. Simply put, the user leases the equipment for mining. In another way, cloud-mining is also called – cloud-hashing (associated with the name of units for measuring the speed of computing processes – H/s; hash per second).
Due to the fact that competition for the production of crypto-coins has grown significantly today, the computing power of several video cards or even one or two "asics" is critically lacking. To go into the financial "plus", recoup the waste for the use of electricity and recoup the waste for the purchase of equipment for mining – you need to have a lot of expensive and incredibly powerful technology. That's why it turns out that the principle of mining has remained the same, but the necessary number of computing opportunities for a positive result and high profitability should be several times higher than, for example, several years ago.
The main advantage of Cloud-Mining is that the company provides the tenant with the equipment necessary for real productivity, and also monitors its serviceability. In this case, the technique will not be at home, annoying buzz and high level of heat output.
There are several options for Cloud Hashing – paid and free:
The essence of paid mining services is the rent of equipment for computing and closing a new block generated by the block system. The power level and the lease term are reported in the contract, agreement with the firm.
Free services for cloud-mining are nothing more than the so-called "Bitcoin faucets". That is, the service leases its equipment, but during the mining the client must perform certain tasks – watch commercials or enter captcha. This is one of the analogues of the slightly forgotten "clicker". As practice has shown, many coins in such a way you do not mine. Basically, the calculation with the client is conducted in Satoshi (this is 0, 00000001 from Bitcoin).
Advantages of Cloud-Mining (Cloud Hashing):
- The ability to work without maintenance equipment for mining "farm".
- High efficiency factor of computing power, which the company provides. By financial measures, to lease several powerful "asics" or video cards, it is much cheaper than buying and servicing such equipment yourself.
- Modern companies that provide sites for cloud-mining, have a good tariff system, depending on the desired technique and the term for which the tenant wants to take it. There are "trial" tariff plans for those who only start work with mining and just want to see and get acquainted with the work. Such plans basically last about a week and are relatively inexpensive.
- Large companies that provide technology for cloud mining, have online cameras. That is, the tenant can at any minute look at the work of the rented "farm". By this, companies build trust relationships with their customers.
- The system does not allow fraud in settlement operations of equipment. That is, even hypothetically, the landlord can not deceive, and charge fewer coins than rented equipment mined. This is due to the principles of the blockchain system work, on which all known cryptocurrencies are built.
- Mining does not bring inconveniences in the form of buzzing equipment, large heat emission and occupied space.
- The average price for a single day of using powerful equipment with large computing powers is about $ 1.5 per day.
- The price for electricity and rental equipment is most often collected from "mined" coins. Although many experts warn that it is better to pay with fiat money in the form of a bank transfer from card to card. This gives at least a small guarantee that the fraudsters can not be deceived. After all, often cloud-hashing companies can work on the principle of a pyramid – this is the only type of fraud that can be present in this area.
Editor: Yuliya Soroka