What is Coin Mining? How does Coin Mining work?
- 1. What is Coin Mining?
- 2. What is the purpose of Coin mining?
- 3. Is Coin Mining Banned?
- 4. Where does the Coin mining money come from?
- 5. 4 notes before Coin Mining
- 6. Types of Coin Mining
- 6.1 Mining Coins for free by phone
- 6.2 Mining Coins by diggers
- 6.3 Using Cloud Mining Services
- 7. Detailed Coin Mining Instructions
- 8. What does the Coin Miner include?
- 9. Coin mining software
- 9.1 The most effective Coin mining software
- 9.2 Memory chip checker sofware
- 10. How to calculate the profit of mining Coin?
- 11. Factors affecting the profitability of Coin mining
- 12. Should we mine junk Coin?
- 13. Risks of Coin Mining
- 14. What methods do attackers often use to take advantage of users' computers to mine Coins
- 15. Effective Coin Mining Experience
- 15.1 Determining goals and capital
- 15.2 Market Research
- 15.3 Controlling Emotions
- 15.4 Beware of Scams
What is Coin Mining? Does Mining Coin make a lot of money? Read the article below of BHO Network to learn how to mine Coin most efficiently. Click to see more.
1. What is Coin Mining?
Coin Mining is to use the power of the miner to solve the complex algorithms of the Token. During Coin mining, miners simultaneously confirm transactions on the blockchain system and create new blocks to add to the blockchain.
For example, miners will confirm transaction information sent/received between users in the Bitcoin blockchain system. It includes information: BTC amount, sending and receiving time, arrival address, outgoing address, ...
After the confirmation is completed, all the information is included in a block. When that block is full, a new block will be created.
2. What is the purpose of Coin mining?
To understand the purpose of Coin mining, BHO Network will reiterate a bit about how blockchain works:
- A blockchain system consists of transactions being performed and recording information into each blockchain block.
- The blockchain needs a common consensus mechanism to record transaction information on the Block.
- Some blockchains use a consensus mechanism called Proof of Work. This means that participants need to perform a certain task on the network before they can record that information in the block. These tasks are usually solving an algorithm on a computer.
Thus, it can be seen that the purpose of Coin mining is extremely important, directly participating in the operation of a blockchain. Without miners, the blockchain system would not work.
3. Is Coin Mining Banned?
Depending on the country, mining may or may not be prohibited. But currently, there is no specific legality about mining Coins in Vietnam, so it can be said that it is not forbidden.
This does not mean that if users are scammed in the process of investing or mining Coins, the Vietnamese government is not responsible.
4. Where does the Coin mining money come from?
Confirming transactions on the blockchain is a core and vital issue for any blockchain. Because if the transaction is not verified correctly.
The transaction amount may be lost or mistaken. From there people will no longer trust transactions on that Chain and that Chain will become a dead-chain.
To increase security, transaction verification will be left to the miners. Blockchains will reward miners after they complete the work. This helps incentivize miners to work seriously.
That reward will include fees for transactions they verify in a block. Tokens generated when that block is formed also known as block rewards. Those rewards will be paid in tokens of the blockchain they verify the transaction.
5. 4 notes before Coin Mining
So what are the notes before Coin Mining read along to refer to this section.
- Blockchains that use the Proof of Work consensus mechanism all need to mine Coins.
- People who use their computer power are called miners.
- Hashrate (hash rate) is a unit that represents the ability of that coin mining device to solve algorithms. The higher the hashrate, the faster the algorithm is, the more Tokens you claim.
- Some miners only optimally mine a few types of Tokens.
6. Types of Coin Mining
Currently, there are the following methods of Coins Mining:
6.1 Mining Coins for free by phone
This form is straightforward, users only need a phone connected to the Internet to earn Tokens. Tokens mined by phone are usually popular coins like BTC, ETH, LTC.
One interesting thing about this is that the applications are mostly Games with Time. It can be said that users are both entertained and have money. But because it is so easy and fun, the amount of money is not much.
6.2 Mining Coins by diggers
This form is popular and known by many online articles. The keywords about miners, "buffalo digging", even a few large and small FUDs in Crypto,... are all derived from mining with diggers.
This can be seen as a job that earns real money, but requires a large amount of capital, as well as will be influenced by the government more or less. Typically, China's ban on BTC mining leads to miners having to move to other countries.
6.3 Using Cloud Mining Services
When it comes to Cloud Mining, a lot of people will immediately think of cloud storage services today. And similarly, Cloud Mining is the act of users being able to participate in remote cryptocurrency mining without equipment or machines.
In this activity, there will be 2 parties such as:
- Mining service provider: They will provide mining machines or sell hashrate remotely to buyers. Some parties are providing this service: Minergate, Genesis Mining, Hashing 24.
- Translation users (investors): They are investments. These users spend money to rent or remotely buy miners/hashrates. And they will receive the corresponding Token according to the contract.
Read more: What is DCA? How does Dollar-Cost Averaging work?
7. Detailed Coin Mining Instructions
If you want to mine Coins, you just need to follow these basic steps:
Step 1: Create a storage wallet
Miners can you can choose to create a hot wallet or a cold wallet. Hot wallets are wallets that are hosted on the Internet. Cold wallets are wallets that are stored in hardware devices. Cold wallets can store a large amount of Tokens, with high security, so they are often chosen by miners.
Step 2: Select Coin Mining Methods
Depending on the type of Token and financial situation, you can choose 1 of 4 methods of Coin mining: using CPU or dedicated machine, phone or Cloud Mining service.
Step 3: Install Coin mining software
If you choose to use a CPU and a dedicated machine, you need to install Coin mining software. This software helps to connect with miner or mining machine.
Through the software, you will know parameters such as hash rate, mining speed, fan speed and temperature. The software is compatible with devices with Windows, Linux, and Mac operating systems. If you choose to use Cloud Mining service, you do not need to install software.
Step 4: Find a reputable exchange
After mining Coins, you need to find a reputable cryptocurrency exchange to sell. Choosing a reputable exchange will ensure that Token trading takes place safely. In addition, you should choose a broker with a large trading volume and high liquidity to trade faster and save more time.
8. What does the Coin Miner include?
A Coin mining rig includes at least the following basic components: CPU, VGA, Hard Drive, RAM, Mainboard, Memory Chip, Power and Internet.
1. CPU (Central Processing Unit) or central processing unit has the sole task of distributing to VGA graphics cards for mining. Therefore, the CPU does not need to be so terrible because it only has the above single task. However, users should pay attention that choosing CPU and Mainboard must match each other.
2. VGA: This is the most important component of a mining rig. It is responsible for directly participating in Coin mining. The stronger the VGA, the better the mining ability. This is the component that users need to pay attention to to upgrade the most.
VGA must be suitable for mining a certain type of Token. There are two VGA suppliers that users may have heard of:
- NVIDA: 1070, 1060, 1050ti,...
- AMD: RX 470, RX 580, RX 570,...
Besides, users should interested in optimizing Coin mining. Pay attention to what type of memory chip is integrated in VGA and how much it can be overclocked.
3. RAM: No need to invest huge RAM, just enough to combine with CPU, Mainboard to run some basic mining applications.
4. Hard drive: Similar to RAM and CPU, users do not need to invest much. For compactness, users choose an SSD with 80G or 120G memory.
5. Mainboard: Users do not need to invest in a huge Mainboard. But it should be noted that it must be compatible with VGA & CPU to optimize mining. In addition, users who want to plug in multiple VGAs, choose the number of ports that can be connected.
6. Memory chip: Pay attention to what type of memory chip is integrated in VGA, the ability to overclock to how much.
7. Source: Source is also an important component in the whole mining rig. It is responsible for providing power for all other hardware to work. A good performance power supply will help the whole system run stably and have a long life.
8. Internet: To mine Coins, users need an Internet connection. The network connection just needs to be stable.
9. Coin mining software
Let's learn about Coin mining software with BHO below:
9.1 The most effective Coin mining software
There are some software that allow users to mine Coins, effective as: CGMiner, BFGMiner, MultiMiner, Miner-Server, EasyMiner, AWESOME Miner,...
9.2 Memory chip checker sofware
Memory chip checker software will help users check which company's memory chip the VGA card is using from. will know how much to overclock accordingly.
Software overclock RAM, VGA
This software allows overclocking RAM, VAG card. This allows to optimize the hardware for users to mine Coin more efficiently.
Ethermine: Used to check how many Tokens have been mined.
TeamViewer Tokens: This software helps to monitor and manage the machine remotely. If there are any problems, they can be handled in a timely manner.
10. How to calculate the profit of mining Coin?
First, users need to know where mining profits come from. As mentioned above, Coin miners will have to perform 2 tasks: confirm transactions and create new blocks on the blockchain.
- Upon completion of the transaction confirmation, the miner will receive a portion of the Token from the transaction fees paid to that miner by those who made the transaction.
- In addition, when a block is generated, that miner will also receive tokens from it. This amount of Token is the motivation for daily miners to plug in and participate in mining Coins.
To calculate the profit of Coin mining, users can visit and dedicated websites to calculate the profit for Coin miners such as: WhatToMine or CryptoCompare.
How to calculate the profit of mining Coin with CryptoCompare as follows:
Step 1: Select Top Lists => In the Other section, select Mining Calculator.
Step 2: Select the Token you want to mine and the specifications of the Coin miner.
For example mine Coin ETH with an Antminer G2 machine with the following parameters:
- Mining efficiency: 220 Mh/s +10%
- Power consumption: 1200W
Therefore, fill in the corresponding information in the blank box and get the result.
Coin ETH with the above parameters, I will receive a profit:
- $17.23 per day
- $120.59 per week
- $516.83 per month
- $6,288.15 per year
This number will multiply many times if the user has a larger Hashing Power.
Some notes when calculating Coin
- Mining profit: Coin mining profit will be able to change over time because it depends on the number of Tokens mined and the value of that Token. If the Token increases in price, the profit of Coin mining also increases and vice versa.
- The number of Tokens mined also depends on the Diff (difficulty) of the block. When Token increases in price, the demand for mining Coin also increases, Diff increases and the number of Tokens mined will decrease.
11. Factors affecting the profitability of Coin mining
To find out what are the factors that affect the profitability of Coin mining, we need to consider many factors such as:
- Hashrate: In simple terms, hash is a math problem, rate is the computer's processing speed. Hashrate is your computer's algorithmic processing speed. Hash rate is calculated in units of hash/s, khash/s, mhash/s, etc.
The faster the hash rate, the greater the chance that your computer can solve the problem and the better your options of getting the block reward.
- Block Reward - block reward: The reward that a miner receives when a Block is verified. The reward will depend on each blockchain. As for Bitcoin, Block Reward will gradually decrease each halving with a cycle of about 4 years.
Currently, the miner will be rewarded with 12.5 Bitcoins for each block generated. This reward will continue to decrease in 2024, so the block reward is an essential factor.
Mining Difficulty: The difficulty of the algorithm, usually for most tokens the difficulty will not change. But with Bitcoin, this difficulty will increase as more miners enter the market. The increasing difficulty of the algorithm causes miners to upgrade their miners continuously.
Electricity cost: This is a significant factor. Because your excavator will work continuously and requires a huge amount of electricity to maintain the supply as well as to cool the system.
Power consumption: Each miner will have a different power consumption index. This index will be related to the efficiency of the excavator, so you need to consider and compare the types of machines when choosing carefully.
Pool fee: Usually miners will join mining pools to increase the possibility of receiving block rewards. That will come with a fee, although not much, but you need to pay attention to it.
Price: This is the most important factor. It may be a bit expensive to build the machine, but as long as the market grows well, there will be no problem.
12. Should we mine junk Coin?
First, users need to understand, "Junk Coins" refer to coins born for the purpose of FOMO, or with bad motives, scams or simply talking about unpopular or unknown coins.
So, should we mine junk Coin? Find out the reasons why you shouldn't mine Junk Coins in the section below:
- Junk coins often do not have high liquidity, worse, after mining, there are no, or very few exchanges that accept transactions.
- Chances of getting scammed are very high.
- Mining Garbage Coins, like BTC, takes time, money and effort.
Read more: What are Pump and Dump? Signs of Pump and Dump
13. Risks of Coin Mining
So what risks can mining Coins bring to Miners? Invite readers to refer to:
- The first problem you face when mining Coin is the maintenance cost of the excavator system. Because the excavator will run continuously, the possibility of damage is very high and leads to injury. In addition, it is very difficult for you to find a place to sell your old miners if you don't want to invest in mining anymore.
- Risk of banning Coin mining: In the future, when it is becoming more popular and energy requirements are increasing until it affects national energy security, the state's introduction of some restrictive regulations is inevitable.
- Coin Price: The end product of Coin mining is Token. The current token price on the market constantly fluctuates, making it difficult for miners to calculate their profits.
- When the market is uptrend, all Tokens increase in price, do not say. But if the market crashes, you should plan carefully if you want to invest in a coin miner system for a long time.
14. What methods do attackers often use to take advantage of users' computers to mine Coins
With the trend of encryption, as more people approach, hackers also create it? fake websites and apps. If you are new, it is very easy to click on these links.
Hackers can obtain emails or personal information and then send emails containing malicious code. They infiltrate the CPU of the user's computer, who clicks on the attachments in the mail. From there, mining Bitcoins from infected computers, even worse, stealing assets.
So, if the user receives any suspicious emails, absolutely do not click. Please quickly delete them to the trash.
15. Effective Coin Mining Experience
After clearly understanding “what is Coin mining”, please refer to compelling Coin mining experiences.
15.1 Determining goals and capital
As mentioned, Coin mining has many forms, so it is necessary to determine the source of capital and goals at the beginning to avoid waste.
To make Coin mining your main job, you must invest a lot in equipment. But if you wish to join as a side business or find a job in your spare time, you just need a phone call is enough.
15.2 Market Research
You should take some time to learn about the market. Thus, you will know the prestige and profit of each coin, thereby making a more reasonable plan.
In addition, understanding the market will help us to know other needs and ways of playing.
15.3 Controlling Emotions
Because the market fluctuates, it is difficult to say how it is right to sell Coins after mining. At these times, you need to control your emotions to devise a suitable profit-taking strategy. No matter which direction the market moves, make sure you don't regret your profit-taking.
15.4 Beware of Scams
In a profitable market, there are also many potential risks. The most common is getting malicious code as mentioned above. Therefore, you need to be careful about security, avoid clicking on strange links.
- What is Gas fee? What you need to know about Gas fee
- What is Sharding? Sharding's potential challenges and risks?
In this article, BHO Network shared detailed information to help you understand “What is Coin mining” and an overview of Coin mining. Please follow our articles to answer questions and update useful knowledge if you have any questions.
Published on August 11, 2022
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