Cryptocurrency mining - is it worth it?

Digital money is not anything like the regular money we use every day and over the past few years It gained popularity very fast and becomes more and more popular every day. More and more people start buying and selling digital money. It has a lot of opportunities that can be done by anyone, one of them is mining, for example, the most popular - bitcoin mining.

The question is - what is mining?

Digital Money mining is a validation of transactions and for that miners get digital money as a reward. These rewards decrease transaction fees. To speed up the rate of generating hashes - a complex mathematical formula puzzle that helps not only verify transactions but also create new currency -, which validates all transactions, it uses specialized machines which are used by miners. These machines are doing the work that we all know as mining. So easy explanation would be: miners are using specialized machines to mine (validate transactions) and getting rewarded with digital money.

To better understand how mining works you need to understand what is blockchain and how does it work. You can read in our previous blog article about "Blockchain explained - why you should care".
Blockchain - a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp and transaction data.

The information for all cryptocurrencies transactions is embedded in data blocks. Each block is linked with other blocks, creating a blockchain. These transitions need to be analyzed as fast as possible to be verified, but digital currency doesn't have this much processing power to do it alone, so there is when cryptocurrency miners come in.

How does mining work?

1.  Miner provides his computer;
2.  Mining hits upon the right hash;
3.  Miners submit their solution to the currency issuer;
4.  Hash verification;
5.  Miners get their reward;
6.  Repeat everything.

At first, there is a miner who invests his time and computer space that runs essentially 24/7 and it does a process that is called "verifying transactions".
To create a block it has to be accompanied by a cryptographic hash that fulfills certain requirements, so with help of miners computer, network solves mathematical intensive computations regularly to find the blocks using specific data mining algorithm - set of heuristics and calculations that create a model from data-, for example - Naive Bayes, until it hits upon the right hash. Then miner submits his solution to the currency issuer and after hash verification, miner gets his reward of given number of coins. "Verifying transactions" process repeats on and on. This system is called  “proof of work” and you can guess what does it mean - you do the work and you get paid for it. Bitcoin, Litecoin, and most other digital currencies use "Proof of work" system.

There is one more mining system called “proof of stake.”.
The goal of this system is the same but the process to reach it is quite different. It means that investors earn through mining - in addition to the "proof of work" income - an amount that's proportional to the amount the miner has invested in the currency. All Proof of stake miners are always those who own the coins minted.

A lot of cryptocurrencies have a limited amount of units that can be mined, for example, there are only 21 million Bitcoins. If That limit is exhausted, miners can't be rewarded by "verifying transactions" anymore.
Mining is like competition. Who has the best computer - wins. Who has the best computer - gets more cryptocurrency.

What do you need to start mining, few suggestions?

At the beginning of cryptocurrency, it was possible to mine with your home PC, well it is possible in nowadays too, but you will not gain any profit by doing that because you will pay twice as much for the electricity. As mentioned before "more and more people start mining", so the hardware necessary to mine effectively increases. Many new miners forgot about electricity consumption when they are buying mining machines video cards and other hardware for mining digital money. There are two ways to start mining - either you buy ready-made mining machine or make one by yourself, that is your choice. If you want to buy one, you have to be careful with power consumption and take whats profitable.

So if you choose to build a mining machine by yourself you will need:
Private database for coin wallet. Coin wallet stores your earnings and keeps a network-wide ledger of transactions.
A free mining software package.
A membership in an online mining pool. It is a community of miners who are combining their computers to increase profitability.
Membership in an online currency exchange. There you can exchange digital money for cash.
Safe full-time internet connection.
A place to set up hardware. That place should be cool or air-conditioned space.
Computer designed for mining.
ATI Graphics Processing Unit (GPU, Graphics card) or a specialized processing device called a mining ASIC chip. Choose the one that's powerful and saving electric power.
A lot of learning, because there are a lot of technology changes and you have to follow them to grow with those changes. Successful miners spend hours by learning new things to improve themselves in this industry.

It is possible to gain money with digital money mining, however, the process can often be time-consuming. It is up to you, how much effort do you want to put in this.

Sources:
https://en.wikipedia.org/wiki/Cryptocurrency
https://www.coinpursuit.com/articles/what-is-digital-currency-mining.137/
http://www.itpro.co.uk/digital-currency/30249/what-is-cryptocurrency-mining
https://www.benzinga.com/general/education/17/08/9953629/cryptocurrency-mining-what-it-is-how-it-works-and-whos-making-money-
https://en.wikipedia.org/wiki/Blockchain