Crypto mining originates from the word cryptocurrency which is a decentralised digital currency. Crypto mining means generating new coins and validating them. A miner creates new coins after validation. The most popular cryptocurrency is Bitcoin. Bitcoin mining is very popular among crypto traders.
Cryptocurrency mining is a complicated process which allows traders to generate new coins. A miner creates a new coin using the existing blockchain technology. The new crypto coin is only generated by the system after validation. A crypto miner works on blockchain and adds new blocks of blockchain transactions to the existing system. Then, a crypto miner needs to validate the transaction and secure it.
Any person with the right amount of knowledge can become a crypto miner. Cryptomining is a highly rewarding job. An individual or a group of people can do mining together. Cryptocurrencies have high market value in terms of prevalent currencies in the market like the Dollar, Pound, Euro, INR etc. That is why lots of people take to cryptocurrency like Bitcoin, Ethereum, Litecoin and other mining as their profession.
In this article, we have drawn a complete picture of the mining process and its pros and cons. Though we omitted the in-depth technical discussion of the blockchain mining process, a complete overview is present in this article.
What is Crypto Mining?
Cryptocurrency mining is a highly technical process of generating a new digital currency called cryptocurrency. Cryptocurrency generation and transactions maintain a decentralised digital public ledger. This public ledger is maintained by using special software. The ledger is a chain of digital blocks, known as the blockchain. A miner adds a new block to the chain to generate a new coin. Each of these blocks contains a Hash known as the cryptographic hash of the previous block. The hash value contains the identity of a block.
A miner mines for a new block that involves a very high level of computation. Miners use Proof-of-work (PoW) algorithm, which is a consensus algorithm to generate and validate new coins.
PoW is a multifunctional algorithm. POW prevents double spending on the same cryptocurrency. It also ensures that the blockchain algorithm reaches all the distributed resources and creates a consensus about a transaction or generation of new blocks. Thus, all participants are aware of the new change in the blockchain. It is a decentralised process. PoW ensures that no third party is involved in the process. Thus, PoW makes the chain decentralised and almost foolproof.
How Does Crypto Mining Work?
A miner makes use of the high computational power of powerful and dedicated computers to solve extremely hard cryptographic puzzles and finds a new block that can be added to the existing chain. Today, a high amount of resources is necessary to generate a new digital coin like Bitcoin. The more people are involved in the process, the harder it is to solve the puzzle of finding new blocks.
A miner uses resources for mining known as mining hardware. Mining hardware helps to solve extremely hard computational problems. Thus, the miners solve cryptographic puzzles necessary to generate new coins.
Miners are always busy solving complex puzzles across the globe. Hence there is always hard competition on who can solve the puzzle first. Miners win the right to add new blocks to the blockchain by solving puzzles. PoW ensures fair competition among all the participants so that no one has privilege. Therefore miners need to compete hard on a level playing field.
The first miner who solves the puzzle receives a reward after the transaction is validated. Though it needs hard labour and the involvement of powerful computers, the reward is also satisfactory to a miner. Hence the miners are always busy creating new coins.
Importance of Crypto Mining
People see cryptocurrency as a parallel currency which is available only in the digital world. But cryptocurrency is also valuable in terms of conventional currency. Therefore. cryptocurrency mining has become a source of passive income. In addition, mining maintains the decentralization of the digital currency by keeping a record of every minuscule change to the blockchain. Therefore, no central system or any individual can bring any change to the system without a record or validation. This makes the system extremely secure also.
The people who started crypto mining way back in 2009 are now filthy rich. Check the graph of Bitcoin above, and you can understand how people made money who mined Bitcoin in the early days. The price of Bitcoin has climbed from almost zero to above 30,000 dollars. Anyone who mined even one Bitcoin at that time is now a rich guy.
How to Mine Cryptocurrency?
We have already discussed that mining requires a lot of resources. Firstly a miner has to employ a lot of time to do mining. Also, a miner has to do a lot of research to become a successful miner. In addition, a miner has to know about blockchain to know the ways of solving the puzzle.
Secondly, a miner needs to have powerful hardware for mining cryptocurrency. Also, a lot of power source is needed to run the machine.
Then, a miner also needs to have mining software to mine a particular cryptocurrency.
Let us discuss the process of mining cryptocurrencies.
Mining needs to solve complex puzzles through computers within a very short time. Therefore a miner needs a high-end computer equipped with an extremely fast processor. Earlier, miners could do necessary computation works with the help of GPU for the PoW algorithm.
Later, they used ASIC and FPGA chips for better computational power. But today, dedicated systems using high-end and specialised hardware are used to run complex mining procedures.
The dedicated systems are costly and consume high power. Therefore, the system must be connected to an uninterrupted large power source. When we talk about mining hardware, we shouldn’t forget about the power source.
Along with dedicated hardware, miners also need mining software. All miners may not need the same kind of software. Therefore, some software is made for small business groups and some for the enterprise and mid-market sections. Here are some popular software for miners.
- ECOS DeFi – Users are 82% small business owners and 9% enterprise.
- Kryptex – 92% of users are small business owners.
- NiceHash – Users are 78% small business owners and 15% mid-market.
- CGMiner – Users are 85% small business owners and 20% mid-market.
- MinerGate – Users are 83% small business owners and 43% mid-market.
- Salad – Users are 92% small business owners and 6% enterprise.
- Awesome Miner – Users are 77% small business owners and 31% mid-market business owners.
- EasyMiner – Users are 100% small business owners and 33% mid-market.
- Cudo Miner – Users are 86% small business owners and 14% mid-market.
- Zionodes – Users are 100%, small business owners.
- Slush Pool – Users are 80% small business owners and 20% mid-market business owners.
- Mining Pool Hub – Users are 80% small business owners and 20% mid-market.
Pool Mining vs Solo Mining
Miners may work solo or may work in groups. When miners join hands to mine together using the same resources, the mining process is Pool mining. Pool mining has multiple advantages. Each miner of the pool works for blockchain mining. When a new block is found and validated, the reward is divided among the pool miners. The share of each is not the same. The system decides it as per individual resources used for mining. In this process, every miner gets a fair share.
Pool mining has many advantages. Firstly, each miner needs to use fractional resources. Therefore initial spending becomes very less compared to solo mining. Secondly, power utilization is also reduced. In the pool system, combined resources are used to do the mining. Hence, individual miners do not need to take the full burden.
Solo miners, on the other hand, use dedicated systems and resources to do the mining. Also, solo miners enjoy the full reward once a new coin is mined and validated. But the solo miners have to bear the cost of machines and electricity. A solo miner needs to mine new coins to cover the cost. Hence, it is found that for an individual miner, joining a pool mining group is profitable in the end.
A Step-by-Step Guide to Mining Cryptocurrency
We know that crypto mining is highly rewarding if the mining set-up functions smoothly. In such cases, cryptocurrency mining can provide a worthy income source. Here is the step-by-step guide for someone who is thinking of starting a crypto mining business.
Choosing the Cryptocurrency
This is the first step. Initially, new miners need to choose a cryptocurrency that requires fewer resources but has higher profitability potential. The most popular cryptocurrency invites more miners to the network. Therefore, more miners are always busy creating new coins, which gives rise to a highly competitive mining environment. Hence, a new miner who has limited resources should look for a cryptocurrency that is not highly valued. But the less valued cryptos are open to exposure to high volatility and high risk. In addition, little-known crypto traders often fall victim to spammers. Cryptos like Ethereum Classic or Altcoin may give better risk-reward ratios.
Mining Hardware and Other Equipment
After choosing the cryptocurrency, the new miner shall carefully select equipment for mining as they are costly. Also, these mining hardware are power-exhaustive. Therefore, the miner needs to calculate future costs before choosing the equipment. But it is important to choose high-end machines to survive the competitive mining environment. ASIC machine is one such example.
Next, a crypto wallet is the next most important step. The miner should connect the wallet to the blockchain setup. A new coin will be delivered to this wallet after validation. A miner can use the new coin from this wallet.
Setting up the System
The new miner needs to configure the system so that it runs smoothly and efficiently during mining. The miner needs to choose and configure the software. It is best to buy the software from the cryptocurrency site.
In addition, the miner should develop a strategy to reduce the cost of electricity. The machine emits huge heat while running. Also, the machine has to be kept under a cooling system. In addition, some humming noise emits from the machine when it is in full use. Therefore, keep the machine in a place where it does not disturb the environment.
Joining a Crypto Mining Pool
Joining a pool is always preferable for a new miner. Pool mining reduces hardware and software costs. The miner gets a reward from the pool in proportion to the resource used. Hence, there’s very little chance of not benefiting from the pool if everything functions well.
Popular crypto coins need huge computing power to mine new coins. Even if an individual runs several ASICs together for mining, it would be nothing compared to the computing power needed to find a suitable Hash. Thus, a pool serves the necessity that needs huge computing power for mining.
This concludes more or less the guide to starting the mining. A new miner should research well before buying equipment and dive into the work directly.
How Long Does it Take to Do One Cryptocurrency Mining?
A cryptocurrency has a digital identity called Hash that contains the identity of the previous block in addition to its unique identity. It is a Hexadecimal number containing unique 64 digits processed in 256-bit encryption technology. Once a crypto is validated, its identity is not traceable. Therefore, it is a very unique number that needs to be computed during mining.
Here is an example of the Hash of a crypto coin. Always, there is only one 64-digit unique number that can match a new block. Therefore, the miner needs to find the number to mine a block through complex calculations before the time limit ends. As per calculation, a new block or a new coin gets generated every 10 minutes. That is why, the computation needs to find a new Hash under 10 minutes, however hard the computation may be. That way, all possible Bitcoin generation will be complete by 2140. Therefore, after this year there will be no new Bitcoin in existence.
Cryptocurrency Mining Profitability Calculator
Cryptocurrency profitability depends on many parameters as shown below. Some arbitrary numbers are there to make the calculator more meaningful. Therefore, numbers do not reflect actual figures.
Mining Profit (Random Example)
|Current Daily Revenue
|Current Daily Electricity Costs
|Total Electricity Costs
|Current Daily Profit
|Total Miner Costs
|Days to Payback
|Price Per TH
|Return On Investment
|Maximum Mining Days(profit>0)
List of a Few Crypto Mining Profitability Calculators
There are many crypto-mining calculators available in the market. Given below are examples of some popular calculators.
- Bitcoin mining calculator
- Dash mining calculator
- Dogecoin mining calculator
- Ethereum-Classic mining calculator
- Litecoin mining calculator
- Zcash mining calculator
In addition to the above calculators, there are 200+ calculators available today. Miners use them as per requirements.
Importance of Using a Crypto Mining Calculator
Mining calculators present many advantages to a miner. A miner can find the net profit very fast after deducting all expenses. Also, buying new equipment becomes easy using these calculators. Also, profitability is always at the miners’ fingertips. In addition, it also compares the profit of other miners and helps to pick the best.
How to use a Profitability Calculator?
Once the calculator is connected online to the system and primary inputs are given, the calculator calculates the profit in an instant. Therefore, the profitability will increase if the cost decreases like electricity and expenses. Miners can control those to some extent.
Crypto Mining Apps
Today there are many crypto-mining apps available for use. These are Android mobile apps available in Google Playstore.
Advantages of using a Cryptocurrency Mining App
Android users can create accounts through mobile apps. Then they can log in and start mining. These apps are cloud-mining apps. A miner can mine cryptos through cloud mining.
Recommended Crypto Mining Apps
The following are the top Android mining apps. A miner can use them.
- Mine Wink
- Mine Dog
- Mine Shiba
- Mine Tron
- Mine BTTC
- Mine Sia
How to Use a Crypto Mining App?
The mobile mining apps allow users to mine cryptocurrency on the go. Many of these mining apps allow users to mine a wide range of cryptos from mobile. Even, some of these are customisable. Once the user creates an account and completes all the prerequisites, the user chooses the cryptocurrency and can start mining. Therefore, their convenience and ease of use have made mining easier than before.
Cryptocurrency Miners in India
Cryptocurrency mining is a little bit difficult in India because of regulatory issues, but it is not impossible. One can do mining in India. But the mined currency can not be cashed in Indian currency, because the RBI does not allow it.
Cryptocurrency Exchanges in India
Here is the list of the best and safest cryptocurrency exchanges in India.
- CoinSwitch Kuber
- Binance India
Cryptocurrency Mining Regulations in India
The law doesn’t restrict people from trading or mining cryptos in India. Before 2020, it was not so. Now, cryptocurrencies cannot be traded in Indian exchanges. Also, cryptocurrencies are not tradeable in the cash market as an asset. Also, profit earned from crypto is taxable in India as income from VDA (Virtual Digital Asset) and is taxed at @30% irrespective of holding time. In addition, the government will charge an extra 1% on profit, if the value crosses the predetermined limit. Hence, an Indian can mine cryptos from India but cannot encash them here in India. However, due to energy and other costs, obtaining permission from authorities is very hard. Therefore, today, one cannot practically do mining from India and make it a commercially viable option. But the scenario is expected to change soon.
Current Trends in Cryptocurrency Mining in India
Due to the huge electricity consumption and environmental impact and cost of machines, the use of mining apps has become very popular in India. Today, using the app and joining cloud mining activities is currently preferred by Indians.
Challenges Faced by Crypto Miners in India
Cryptominers face many challenges in India. Listed below are some of them.
- The environmental policy of India does not support high energy-intensive works like crypto mining in India.
- Also, a miner needs to obtain an environmental permit in India which is hard.
- A high expense due to high energy costs.
- Also, high temperature in most parts of India prevents running the mining rigs. Extra costs are needed for continuous cooling of the machines.
- The Indian government do not allow the import of ASCI machines. Bypassing this law is challenging. Some recent changes may make it possible but the rules are still unclear.
Thus, a miner in India has to face many challenges and bear extra costs for mining.
How to Start Crypto Mining in India?
Prerequisites for Starting Crypto Mining in India
A miner needs to follow the steps given below.
- Initially, the buyer will choose the suitable crypto for mining.
- After that, a miner should start by buying effective hardware and a suitable cooling system and installing them.
- Then the miner needs to buy suitable software which is available from individual cryptocurrency sites.
- Next, the miner should need a cryptocurrency wallet for keeping and transacting the cryptocurrency.
- Then, joining a pool or creating a mining team will make the miner ready to start mining.
Recommended Crypto Mining Pools in India
Here is the list of some top crypto mining pools active in India.
- BTC Guild
- KnC Miner
- Zebpay Bitcoin Mining Pool
- Ethereum Mining Pool
- Stellite Mining Pool
- Litecoin Pool
- Slacoin Mining Pool
There are a few other mining pools which are also popular. A miner can choose any pool.
Cost of Crypto Mining in India
Let us consider the cost of Bitcoin in India because it is the most valuable among all cryptos. As per www.911Metallurgist.com, based on the calculation based on April 15, 2022, a Bitcoin mining cost in India is $40424.67. This figure comes to around Rs 32.13 lakhs approximately.
Expected Returns from Crypto Mining in India
According to data reports available as of 15.07.2022, Bitcoin mining is not profitable in India due to high energy and other costs. One Bitcoin mining gives a loss of around -$20668.14.
But, this figure will not hold for mining other coins in India. The profit/loss will be different.
In India, the idea of mining is comparatively new. Though Bitcoin started in 2009, it obtained popularity after a few years in India. But today, the interest has picked up among commoners. People in India prefer Android apps for cloud mining activities. These apps are well in use. the government is also trying hard to pass bills to remove policy-related obstacles.
Soon, we expect the cost will be less. Already some miners are using rooftop solar systems for reducing costs. The cost will come down drastically if solar systems are effectively used. We expect to find mining a highly profitable business very soon.