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What is crypto mining?

Crypto mining has become a serious, multibillion-dollar industry. The doors to it are open to anyone who understands the basics.

The mining of cryptocurrencies has been around since the creation of Bitcoin. It all started on peoples’ laptops and computers, but got more difficult over time because of hardware limitations. Mining is the process of creating new digital currencies by solving complex mathematical puzzles. 

The puzzles are created by combining multiple algorithms and hashing functions, but they aren’t easy. Especially nowadays. That’s why miners combine their efforts with others to create blocks (groups) in an attempt to find winning combinations faster than anyone else can.

What is crypto mining?

Mining for cryptocurrencies is a straightforward process of creating brand-new digital coins. To mine the coins, the hardware will need to solve difficult mathematical puzzles, authenticate cryptocurrency transactions on a specific blockchain network, and add the transactions to a distributed ledger.

Related article: Why is mining the safest entry into the crypto world?

Since it is simple to compromise a digital platform nowadays, extra safety measures should be put in place as well. To prevent double spending, a cryptocurrency’s ledger can only be updated by confirmed miners. As a result of their decentralized nature, distributed ledgers rely on mining to ensure the validity of recorded transactions. 

Miners have the incentive to maintain the security of the network since they can earn newly minted coins by taking part in the validation process. The miners safeguard and maintain the blockchain, the blockchain distributes the coins, and the coins reward the miners. 

This makes them continue safeguarding and maintaining the blockchain, which creates a positive feedback loop. A Proof of Work (PoW) method makes the whole thing possible. Bitcoin has been actually based on PoW, but there are several other cryptocurrencies that function on PoW, including Litecoin, Dogecoin, Kadena, and formerly Ethereum, which transitioned to Proof-of-Stake (PoS)

What are the costs of crypto mining?

Crypto mining costs are unique to each miner. Besides the time that has to be put in to start,  invest money in equipment, electricity, cooling systems is also needed. The costs of these tools will vary depending on the type of cryptocurrency you’re participating in. 

The amount of money that needs to be spent on the operation of crypto mining starts at four digits. There are some mining companies with equipment worth millions. It’s hard to compete with that as a single miner. 

What kind of hardware is needed?

It’s important to remember that mining cryptocurrencies won’t work on basic computers. That is why crypto miners use either GPUs (Graphics Processing Units) or CPUs (Central Processing Units). They both work well when mining cryptocurrencies but CPUs are less expensive than GPUs.

So, CPUs are the best choice for beginners who are keen on trying mining. They’re better suited for it, but are not as powerful as an ASIC machine which is designed specifically for crypto mining purposes – these could cost thousands of dollars per unit. However, if used properly they could last for many years. 

Is it legal to mine crypto?

That is an excellent question, with many answers. The legality of mining in the world remains unclear. In some jurisdictions, crypto miners are seen as money transmitters, being subject to classic laws. However, it may be legal in some countries as well.

Also read: How to mine cryptocurrencies in a bear market

Canada or Portugal are mining-friendly, meaning the mining operations can happen there without any problems. Moreover, El Salvador would be probably more than happy for anyone to establish mining operations there. But countries like Bolivia, Bangladesh, and China have strictly banned crypto mining. 

How is crypto mining profitable?

Cryptocurrency mining is profitable because it can earn money from the electricity costs of the mining equipment, as well as from the cryptocurrency that are mined. Moreover, transaction fees, which are paid by users to miners to confirm transactions on a blockchain and record them in history, need to be considered as a potential profit as well. 

However, sometimes crypto mining may become difficult even for the largest companies, especially during crypto winter, when prices dramatically fall. This is why Genesis went bankrupt

Is mining with laptops possible?

Mining cryptocurrencies using your laptop is not profitable because it will not get enough hash power to mine cryptocurrencies efficiently and profitably.  The complexity of mining has increased with the price of cryptocurrencies over time. It’s not 2010 anymore. 

bitcoin mining

Mining meme, source: link


Most of the time, mining is a strongly profitable activity, if done correctly. However, anyone should be aware of the risks involved in crypto mining and make sure that the computer has sufficient hardware power before getting started. It is also necessary to be aware of cycles, as the crypto market is very volatile. 

One year, cryptocurrencies can rise 500% in value, but another year they can plunge 80%. This is why it is important to be able to sell during the biggest market expansions and accumulate mined coins during bear markets. Overall, it is very useful to understand how mining works because the operations of miners influence cryptocurrency’s price significantly. 

I got into financial markets by accident in 2012 and started with Forex trading. Later in 2017, I started investing in stocks in cryptocurrencies and began writing articles profess...


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