Cryptocurrencies are mined on the network by generating new coins through mining. This can be best explained by the crypto-currency bitcoin. Each network client could in theory earn money by mining with the associated bitcoin address. However, in order to participate in the mining process, various requirements must be met.
“Mining” is the execution of essential control functions in the blockchain. No third party checks transactions done in the financial service provider or bank system. It is also worth mentioning that cryptocurrencies such as bitcoin cannot be issued twice. Thus a fraud is largely excluded. Mining within the bitcoin network ensures that all transactions are properly executed and recorded in the blockchain.
All transactions that take place within the network are sent to all network users. So, basically every single user can participate in the calculation of “blocks” and “block chains”. Once the transaction is validated and validated, the user, who has been able to solve the associated mathematical problem, receives a reward in the form of bitcoins. Since the system requirements for bitcoin are now very high, it is usually not a single user, but a user pool or mining pool.
“mining” in general
In particular, newcomers to the industry often assume that “mining” is all about generating new cryptocurrencies. However, this is only partially true. First and foremost, mining serves to secure the blockchain. So-called “miners” have the task of keeping the network stable by checking and validating new transactions. Each individual network participant can verify a transaction and put it in a new “block”. A finished block is then integrated into the blockchain as a “block chain” for all time. The mining process also ensures that the network does not duplicate transactions. Furthermore, miners ensure that no one violates the rules of the network protocol.
increasing hardship and low pay
The fact is that due to the mining system it is becoming increasingly difficult for individuals. Over time, fewer and fewer coins can be minted. This slows down the growth of money until it finally comes to a standstill. In total, 21 million bitcoins can be generated. This limit is set for the bitcoin protocol. It is believed that the last bitcoin will be mined around the year 2140. However, experts also believe that 100 years ago, more than 90 percent of all coins would have been generated.
How can individuals benefit from mining?
At the beginning of the crypto currency bitcoin (between 2009 and 2010) it was still possible to calculate blocks in the bitcoin network as normal computer users with the help of their own graphics cards. At that time the generation of new bitcoins was still attractive to individuals. Meanwhile, this is practically impossible. Because the computing power required for mining is too much for the average computer user. Nevertheless, it is possible to participate in bitcoin mining as an individual and make profits.
- Mining Pools: One possibility is to join a so-called mining pool. These are networks that use shared hash power to calculate the block chain to obtain newly generated bitcoins. Mining pools differ mainly in size, but also in the type of remuneration for the individuals who participate.
- Mining Automatically: You can, of course, participate in the mining process yourself if you have the appropriate mining hardware. Using a mining calculator, miners can calculate how much computing power is needed to make the investment worthwhile.
- Cloud Mining: Another option is to contract with cloud mining providers. These contain server farms and provide users with the computing power needed to mine specific cryptocurrencies over that period of time.
“Mining” cryptocurrencies through so-called cloud mining providers is also becoming interesting for individuals. Depending on the provider, interested individuals can choose from a range of different cryptocurrencies and associated algorithms.
Since cloud mining contracts can vary greatly depending on the provider, it is recommended to do an accurate comparison of cloud mining providers. A presentation of the most well-known companies in this sector can be found in our supplier overview.
General Interim Findings on Mining
Bundled computing resources are particularly promising because of the increasing difficulty in the mining process. In addition to mining with your own computer, there is also an opportunity to participate in mining pools or use the service of cloud mining providers. The latter also work with mining pools. Available resources are effectively used to participate in mining.
We will discuss the topic of cloud mining in more detail below.
What is cloud mining?
The time when private users were able to “mine” cryptocurrencies like bitcoin seems to be over. In any case, autonomous mining becomes increasingly difficult due to the high computational power required. Anyone who still wants to dig for a cryptocurrency needs not only technical skills, but also extensive equipment. However, because in most cases it is no longer cost-effective to act as a single miner, today it is possible to use so-called cloud mining.
Note: Cloud mining is not to be confused with mining pools. In these, many users work together by pooling their computing power. With cloud mining, users rent or buy computing power or hardware from cloud mining providers. These are decided through a contract. Often a maintenance fee is added. BUT: Some cloud mining providers work together with different mining pools.
Cloud Mining: The Facts
- In “cloud mining”, users buy or rent the computing power or hardware needed for mining from cloud mining providers.
- The cloud mining company performs the mining process under a closed contract for the contracting party.
- The amount of remuneration of the amount stipulated in the contract. Furthermore, any maintenance charges will automatically be deducted from the profits made.
To make cloud mining attractive to ordinary users, various cloud mining providers have already established themselves in the market. Various contracts allow users to enter the mining process customarily. Depending on the provider and the currency chosen, there are both lifetime contracts (as long as the contracts are profitable) and limited ones. One clear advantage of cloud mining is that users do not need to provide their own hardware and computing power. This is done entirely by the cloud mining provider.
How does cloud mining work?
In the first step, an interested party needs to opt for a cloud mining provider. Here’s a look at our cloud mining vendor overview. He then visits the provider’s website and opens a customer account. Cloud mining is always compared. Because depending on the provider, the offers and terms can vary greatly.
Based on the selected provider, the user can then select and conclude a mining contract and the associated computing power. After purchase, the cloud mining provider’s hardware usually starts with the generation of coins. For some providers, however, contracts sell out too quickly, so that the customer has to wait, in this case, from a few weeks to months. More information can be found in our cloud mining provider review.
The coins mined by cloud mining can then be transferred to your wallet. Delivery is done weekly to daily and also depends on the provider selected. Leased computing power is also linked to the respective mining pools by cloud computing providers. In this case, the user does not need to worry about anything after completing the cloud mining contract.
These advantages are offered by cloud mining
The entry barrier to mining, especially for beginners, decreases with cloud mining company offerings. Because they do not require any software knowledge that would be required to set up a high-performance computer, nor do they need to have the appropriate hardware themselves. Accordingly, there is no need to invest large sums of money before the start of mining.
As in the early days, individuals with small amounts can again participate in mining. Another advantage of cloud mining is the flexible use of computing power provided by cloud providers. If the business is profitable for the individual, additional resources or contracts may be added as needed (depending on the provider). It also allows a flexible response to the relevant market conditions.
These are the disadvantages in cloud mining
The low investment cost and resulting flexibility can be purchased by users through corresponding contracts with cloud mining providers. In general, however, more money should be paid for more computing power. Furthermore, there are contracts with various durations and maintenance fees that most cloud mining providers demand.
Another problem is the threat of cloud mining fraud. Users should always inform themselves about the provider from which they are getting computing power. Our cloud mining provider comparison only lists reputable companies with their services. Furthermore, we recommend that you read the respective Cloud Mining Experience Report to learn more about the cloud mining company.
There is a general risk of loss in the context of volatile digital currencies. The general risk is the price development of a cryptocurrency. It also depends on the success of mining. Because even if the cloud mining provider coordinates the entire process very well and everything is done to the complete satisfaction of the customer, all parties involved should always expect that the value of the chosen cryptocurrency will sink. Is. Therefore, it should always be noted that loss of capital is possible at any point of time. However, the corresponding digital currency would then have to be (almost) completely worthless.
How much can you earn from cloud mining?
The efficiency of cloud mining depends on a number of factors. Among other things, as already mentioned, the price of the respective digital currency plays a role. But the cost of cloud mining is also a part. In most cases, this is a fixed amount, which was determined through a related contract. The cost is as per the currency chosen on the one hand and also after the duration of the contract and other charges on the other hand, which are borne by the proposer.
Furthermore, any fees for transferring or selling scrapped coins must be accepted by users. If, for example, scrapped coins are transferred from your own wallet to another wallet or a stock exchange, transaction fees usually apply. This means that in addition to the net cloud mining costs, there may still be additional fees that reduce revenue. When choosing a cloud mining provider, make sure that all costs and fees are transparently displayed.
Basic concept of digital currency
The concept behind digital currencies dates back to 1998. Wei Dai pitched the original idea through a cyberpunk mailing list. But at that time it did not come to the implementation of the idea, since there were no technical requirements for this. In 2008, Satoshi Nakamoto reconsidered and published in a white paper the concept of a digital currency – bitcoin (“peer-to-peer electronic cash system”). individual”. The result was the innovative bitcoin network (the bitcoin protocol) based on cryptography.
On January 3, 2009, the first bitcoins were generated electronically. It was Nakamoto himself (so far it is not known whether it was a single person or a whole team), who “scraped” the first 50 bitcoins.
General information about the cryptocurrency Bitcoin
Digital currencies are still quite young, experimental and at the same time very expensive. The latter applies above all to the undisputed market leader bitcoin. Cryptocurrency has practically kicked off a new era of payments – at least when it comes to bitcoin supporters. Even for an innovative and decentralized currency like bitcoin, some hurdles had to be overcome in the past to gain recognition.
To date, bitcoin has many advocates, but also many critics who point out the threat it poses to the financial system. Reason: Neither the state nor the banks can interfere with the transactions taking place in the bitcoin network. Although the digital currency was laughed at in its early days, it has made a remarkable journey, especially in recent years. It is regularly read in the media. Banks have no other choice regarding cryptocurrency as a serious competitor to traditional currencies. This is precisely the goal pursued by Bitcoin. In addition to generating new coins, bitcoin should be given a permanent place in the financial sector in the future, as a recognized means of payment. In this country, currency is still not a common means of payment. But other countries have already created bitcoin.
Where else can you buy bitcoin?
Bitcoins (as well as other cryptocurrencies) can be “mined” not only in the network. Investors can also buy them on relevant marketplaces on the internet and on stock exchanges. Depending on the provider, coins are either acquired by other individuals (barter) or purchased directly from a provider at a current price. Price is always determined by supply and demand.
Cloud mining providers compared
Meanwhile, there are some cloud mining providers on the market who offer their services on different terms. For users, it is very important to familiarize themselves in advance with a provider’s services and associated costs. To be able to get an idea of the providers, we have compared various reputable cloud mining providers with their services for our readers. These include other well-known companies Hashsphere and Genesis Mining, each of which has been successfully operating in the market for several years. Both providers allow mining of various cryptocurrencies apart from bitcoin. Various contracts with different maturities are offered. Customers have to visit here in advance. Once a contract is concluded, the chosen cloud mining provider starts implementing and participating in the respective mining process.