Cryptocurrency began with blockchain — a chain of consecutive blocks containing transaction data from users. This is the foundation on which digital currency appeared, with each cryptocurrency having its own blockchain.
What does the block mechanism in the chain look like?
When a transaction occurs, data about it is compiled into a block. It is added to the general blockchain network after a new coin is created or when all calls and passwords during the exchange/transfer/sale/purchase are verified and confirmed. This brings us to the second important point — mining, which involves tasks such as searching, generating new blocks, and confirming transactions for the blockchain. Miners handle these tasks.
Once a block has been recorded and added to the chain, the user cannot make changes to the record of operations. This is a peculiarity of the blockchain network mechanism, which makes it a secure method for storing data. Each cryptocurrency has its own cryptographic algorithm that encrypts transaction data. For example, in the case of Bitcoin, this is the SHA-256 algorithm, which transforms information into a unique string of characters.
How does the process of generating new coins work?
For this, miners regularly solve cryptographic tasks of 64 characters to calculate a unique hash for a specific block, containing transaction information. The faster they guess the hash, the faster a new block will be created in the network, and the miners will receive a reward. Then others must verify that everything was done honestly during mining (this is called Proof of Work). The miner’s main tool here is a computer: the more powerful it is, the faster it will guess, and therefore win more often.
Bitcoin can be issued in a total of 21 million coins, after which the issuance will stop. When the process of creating new digital units in the network is completed, miners will be left with tasks such as:
Ensuring the stability of the blockchain network Maintaining the safe and uninterrupted operation of the blockchain Helping to expand the network: verifying and confirming transactions Thus, mining is not only the generation of new coins, but also the confirmation of transactions, checking operations for fraud, and maintaining the safe functioning of the blockchain as a whole.
How Cryptocurrency Mining Works
To start the process of mining cryptocurrency, a beginner will need a minimum set:
Powerful equipment (most often, special computers suitable for mining, such as ASIC, are used, which can process large volumes of information)
Special software for work tasks (it can be downloaded for free on the internet and installed on the equipment)
There is also such a concept as mining farms — a system consisting of several ASIC computers. By combining the efforts of several such computers, you will have a much higher chance of quickly solving a cryptographic task and including data about transactions.
Depending on the power of the computer, miners can work:
Individually
In a team
If you are mining Bitcoin alone, you can only rely on your own rig and bear full responsibility for both success and failure. Not everyone has the opportunity to buy equipment with huge capacities (which requires regular updates and upgrades), so many prefer mining pools: there, “miners” join forces to faster decipher hashes, generate blocks in the network, and receive rewards. Moreover, the winnings are divided among the participants in proportion to the efforts invested during mining, i.e., the power of their equipment. The stronger the computer, the larger the share. Well-known pools include Btc.com, Via BTC, and F2pool.
Each miner has their own hash rate — a performance indicator of the number of hashes per second that their computer can calculate. Another parameter — the difficulty of mining cryptocurrency — shows how difficult it is to find a hash. It is usually kept at a level where a block is generated on average every 10 minutes.
Some miners use cloud mining services: when you do not buy expensive computers at home (and then pay huge electricity bills), but rent the power of someone else’s equipment through a site or application. This is one of the simple ways that do not require much effort, which is especially important for those who want to try and understand if mining suits them. Among the popular providers are Genesis Mining, EasyMiner, and ECOS.
There is also browser mining, for which no expensive powerful equipment is required. To receive a reward, you need to use a specific browser. However, this method has one significant disadvantage — small rewards. You can try your hand at this type of mining, for example, in the Brave browser.
It is also worth mentioning hidden mining, when someone infects your computer with malicious software and thus gains access to it (and illegally uses its power). In fact, this is fraud. In such a situation, you receive the reward for processing transactions, not you, but the one who uses you. And most importantly, you may not even notice for some time that your computer is connected to hidden mining.
What rewards do miners receive for their work?
In March 2024, the price of Bitcoin reached a mark of $70,000, which became a historical record, and for miners — a signal that the coin will continue to rise in price in the next few years. This means that more blocks with transaction data need to be generated for a wealthy old age, because the more blocks you have created, the greater your reward. But can you really get good rewards for mining cryptocurrency?
If answered briefly and generally, the reward for mining can be quite large. If you understand how the processes and mechanisms work, have equipment with sufficient power, and be part of this community for some time. However, beginners should not dream of big rewards at the start of mining: they will have to be patient and gain experience.
Reward for creating a block
If we talk about rewards, it is better to do so with specific figures and examples to understand the situation in the market. In the distant 2009, when BTC just appeared, a miner could receive 50 coins for a block. Gradually, the reward amount decreased, and in 2012 it was already 25 bitcoins. In 2016, it became even less — 12.5 BTC, and in 2020–6.25 BTC. For now, this amount has stopped at 6.25 bitcoins for each block added to the blockchain network.
The reduction of the reward amount during mining is called halving — when the reward for a block is halved. It occurs in the Bitcoin blockchain network after mining every 210,000 blocks, which takes approximately 4 years. So, in April of this year, a new halving should occur, and then the reward for mining BTC will reach 3.125 bitcoins.
Reward for other services
Miners receive rewards in cryptocurrency for performing tasks such as verifying and confirming transactions in the blockchain. This is about the commission — a certain percentage of the realized operations that the miner included in the block for the blockchain network.
The more miners compete in searching for and deciphering the hash, the harder it is for them to find a new block and generate it. This option is made to maintain stability in the blockchain, to ensure a constant inflow of new bitcoins, and to restrain the size of cryptocurrency inflation.
What affects the reward
When discussing rewards for mining, it is impossible to ignore the possible costs that miners may incur in the process. What can affect the miner’s reward?
The size of the reward for a block
The difficulty of the mining process (purchasing powerful equipment or renting a cloud, regular setup and equipment updates)
Network hash rate
Electricity bills
Mining pool commission (if you are not a lone wolf)
Market (unstable) cryptocurrency rate
There is even a special calculator that allows you to pre-calculate likely costs and reward size. For example, the ECOS calculator evaluates the power of the equipment, reward, and service cost for a specific period.
Nowadays, individual miners are increasingly joining mining pools because they will not be able to get a large total amount of rewards in the network on their own.
In addition, there are other things that complicate the process of monitoring transactions and creating new links in the blockchain chain.
Electricity is the sore point of all miners, so they strive to work from countries and regions where this resource is cheaper.
Taxation — each country has its own laws regarding cryptocurrency and operations with it, and somewhere the sphere of digital money is not regulated at all yet, etc.
Legislative mechanism — the attitude of the country’s authorities towards cryptocurrency mining can be different, it can be illegal or not specially regulated, and this must be taken into account.
For example, a good option for mining Bitcoin will be Armenia. It is there, by the way, that ECOS provides its services. The authorities of the country understand the importance of supporting technologies that shape the future, so they strive to contribute to their development. For example, a special economic zone has been created there for miners, where there are zero taxes and various benefits for a period of 25 years.
Reward for other services
How to start mining cryptocurrency Let’s look at the basic steps to start mining Bitcoin in two formats: with your own equipment or through cloud mining.
Mining with your computer Choose an ASIC computer model For mining, you need modern equipment with a high hash rate and sufficient power to have a water cooling system that allows you to reduce noise. Such a computer will be expensive, but maximally convenient for mining Bitcoin.
Set up ASIC and install software If you understand the topic, you can try to set up the equipment yourself. But if you are a complete beginner, it is better to ask for help from those who have already been receiving rewards for mining for a long time.
Create a Bitcoin wallet Rewards in bitcoins for mining will be transferred there. There are hot wallets — applications for a PC or smartphone, and cold wallets — physical media (in the form of a flash drive) where you store your savings.
Start mining, gain experience
We have already described the nuances and subtleties during mining.
Follow the news It is important for a miner to understand what the situation is in the market, how Bitcoin or any other cryptocurrency is feeling, what new products have appeared in the equipment, what has changed in the legislative mechanism of a particular country regarding digital money, etc. It is also useful to join online mining communities to share news and exchange experiences.
Cloud Mining Register on a site or application with cloud mining For example, on the ECOS platform. Moreover, personal identity verification with documents is not required here.
Activate demo mining mode You can test cloud mining, learn how it works in practice. You do not spend money during this time, but the reward will be credited to you only if you subsequently buy access to the platform.
Choose and buy access to cloud mining If the test satisfied you, you can pay for access. There are tariffs here both for beginners and for experienced miners.
Conclusion
Receiving rewards for mining cryptocurrency is not that simple. You will have to invest financially, devote a lot of time to it, and most likely work in a team, not solo. And also, if you live in a city with high electricity bills, you will have to move. On the other hand, you will be at the forefront of technological development and participate in the development of a promising project. And considering that not only interest in digital currency is steadily growing, especially in BTC, but also the price of coins, the reward for mining can be real, not just a dream.
