Tyler Bain

Article / Updated 07-10-2023

Cryptocurrency miners need to keep an eye on the latest mining info to be successful. The best method of checking the pulse of the burgeoning cryptocurrency mining industry is to stay up to date using online resources, such as social media and specific online forums covering the topic. Due to the infancy of the cryptocurrency mining space, many news sources in the space can be misleading, downright inaccurate, or even propagate bought-and-paid-for content without a sponsored label. A recent study found that many of the top cryptocurrency news sites were posting sponsored content — essentially ads — under the guise of news. This kind of misinformation makes it important to stay plugged into the community and various other peer-based resources: don’t trust, verify. Check out the following list of resources to stay up with current cryptocurrency mining events: Bitcoin Talk: Use Bitcoin Talk to inquire into almost any cryptocurrency topic, including (but definitely not limited to) mining. Despite the name, it’s not just for bitcoin anymore. You’ll find many different cryptocurrencies being discussed. For example, it is where most popular alternative cryptocurrencies were announced prior to launch. Bitcoin subReddit: The bitcoin subreddit provides a great forum for lots of breaking news and current events and provides a window into the current sentiment in the community. It’s not all serious stuff, though; you’ll find plenty of memes, jokes, and other nonmining content, so do surf lightly. Bitcoin Beginners subreddit: The bitcoin beginners subreddit is an even better resource for recent entrants into the ecosystem, providing plenty of great information for newbies. CoinDesk: CoinDesk is a decent news source in an industry riddled with faulty cryptocurrency news outlets. It also provides exchange rate data from a variety of different cryptocurrencies. CoinJournal: CoinJournal is also a good source for cryptocurrency-related news, but clearly separates press releases from news articles so users can differentiate public relations from journalism. Bitcoin Magazine: Bitcoin Magazine has long been a reliable news outlet in the cryptocurrency space. Although print releases of the magazine stopped years ago, it still provides good and consistent news coverage on its website. Merkle Report: The Merkle Report curates a wide variety of relevant content from various news sources in the cryptocurrency space. It offers a good one-stop shop for news across the industry. Messari: Messari has a ton of cryptocurrency-focused data, research, and news from across the industry. It also offers a periodic daily newsletter to stay up-to-date on current trends. Block Digest: Block Digest is an excellent source of news in the form of a weekly podcast that features various community members discussing and digesting news and headlines from the Bitcoin space. Stack Exchange: The Bitcoin Stack Exchange has a large trove of questions answered by other cryptocurrency enthusiasts. Anyone can post a question or an answer. If you are looking for specific insight, chances are someone has already answered the question you may have. Why current events are important for cryptocurrency mining Cryptocurrencies and blockchains act as an immutable record of data, indisputable information that is accessible to anyone with the tools and knowledge to look for it. This isn’t the case with off-chain data, such as current events and news in the space, which is why it is very important to stay up-to-date on accurate information from reliable sources if you intend to mine cryptocurrency. Current events affect what’s going on in the mining space. They can affect the value of the cryptocurrency, and thus, in response to fluctuation in the value, the network hash rate, your percentage of the network hash rate, the amount of blocks you’ll mine, and ultimately your loss or profit. There is plethora of news sources in the cryptocurrency mining space, but not all can be trusted. Some peddle misinformation with the intent of misleading you. Staying up to date on the latest and greatest in the cryptocurrency mining industry is crucial to your continued success in the space. Reliable content is the best defense against spin and distortion from those that would lead you astray. Without information, you may find yourself mining a cryptocurrency without much future value, or on the uneconomical side of a blockchain fork. In any event, as a cryptocurrency miner, you will will have the best chance of success if you stay current with developing information.

Cheat Sheet / Updated 05-17-2022

Cryptocurrency mining is a relatively new concept that started slowly and has, over about a decade, developed into an entire industry with a wild-west-gold-rush reputation. The mining of “digital gold” in the form of cryptocurrencies is often painted as a get-rich-quick scam, with comparisons to tulip mania and the gold rushes of years past. Indeed, the industry is rife with hype, scams, and misleading promotions, and there’s a lot of room for error. However, there are profitable mining ventures, and there is still room for you, as a new miner, to profit from cryptocurrency mining if you do your research, do your homework, and plan carefully.

Article / Updated 02-16-2022

When it comes to Bitcoin and other cryptocurrency, mining is not about tunneling into the ground and hauling out ore. It's actually a computerized method for verifying the legitimacy of cryptocurrency transactions and entering new cryptocurrency into circulation. Cloud mining operations are mining farms — data centers dedicated to mining — that sell or lease hashing power to cryptocurrency miners. The essence of the service is that a third-party hosts mining equipment and provides access to the rewards associated with the equipment. Cloud mining has many advantages and disadvantages. For one, the user must trust the cloud provider in a space ripe with scams and frauds. The user is not in control of the equipment or how it is used. The advantages, of course, are not having to fill your home with computer equipment, not having to deal with the noise, the heat, the power consumption, and the upkeep of the mining equipment, and so on. Essentially, you outsource the work. Pool mining versus cloud mining So what’s the difference between pool mining and cloud mining? In both cases you’re working with a third party: With pool mining, you need your own mining rig, and through the use of the pool’s software, you contribute your mining rig’s processing power to the mining operation. You’ll need to deal with buying and managing equipment, running the equipment, cooling the equipment, keeping a solid Internet connection up and running, and so on. With cloud mining, you are essentially an investor in a mining operation; all you provide is money. Cloud mining companies sign up thousands of individuals to invest various sums into the operation and who take a cut of the proceeds in return. All you need to do is find a reputable cloud-mining operation (be careful!), send them money, and go about your daily business while they manage everything. Pros and cons of cloud mining In cloud mining, don’t get to keep blocks you mine (you have to share them); you have to pay the cloud-mining firm a fee to play (but think of all the hassle you avoid!), and like pool mining there is the danger of concentration of power into a small number of hands. You may also find switching more difficult, as some cloud contracts require a longer term commitment; you may not be able to jump ship quickly. Also, on occasion, if mining the particular cryptocurrency becomes unprofitable (as sometimes happens), the operator may cancel the contract. Carefully do your homework and research on cloud mining firms prior to investing any significant amount of money into these services. A brief guide to cloud mining In cloud mining, you essentially fund a portion of a mining operation, and the cloud miners do the rest. You are, in effect, an investor in the operation. These companies offer hash rate contracts. You buy a certain hash rate, for a certain period of time, and you then benefit proportionally based on the percentage of the overall cloud mining operation that you have funded. A huge advantage of these services is that it’s totally hands off — no equipment to buy or manage, no space to find for the equipment, no equipment noise, no heat to deal with. Cloud mining service solves those issues for you. However, cloud mining can also be somewhat risky. Many are not profitable for the durations specified in the contract and can leave purchasers of these services losing money, in some cases, over the long run. Users may have been better off simply purchasing the cryptocurrency that their mining contract mines. (That, of course, is often also true of pool and solo mining.) Other risks include outright scams. A common mantra in cryptocurrency mining circles is “not your keys, not your coin.” In the case of cloud mining contracts, one might say, “Not your mining hardware, not your rewards.” The following services rank near the top of trustworthy cloud mining operators. However, caveat emptor, buyer beware. For all services, you must do your due diligence, find out what the community is saying about them, and ensure that they are, or still are, trustworthy and reliable: Genesis Mining Hash Nest Bit Deer Hash Flare This list is brief as many experienced miners only feel comfortable about only a few cryptocurrency cloud mining providers, as many of the rest are not trustworthy and do not offer the services they advertise. However, that doesn’t mean the preceding services always provide profitable mining contracts. It just means they do in fact deliver on the services that they offer and they provide the hash rates advertised for the period promised. But that doesn’t mean profitability at all times. Cloud mining contracts profitability varies widely between services. Note also that there’s overlap between pool mining and cloud mining. Some pools will not only use your hash power, but will also sell you hash power. After you’ve set up your account with Honeyminer, for example, the pool will try to sell you more hash power. In effect, you’re connecting your processors to the pool’s node, but you are also providing cash to the pool to purchase more computing power, which they will then manage for you. Cloud mining is just one option available to cryptocurrency miners. Always do your research before you begin any cryptocurrency mining endeavor.

Article / Updated 02-16-2022

Cryptocurrency mining involves the addition of transactions to a blockchain by a crypto miner. But, it’s a bit more complicated than that. Take a look at decentralization and discover the role of the crypto miner. Understanding decentralized currencies Cryptocurrencies are decentralized — that is, no central bank, no central database, and no single, central authority manages the currency network. The United States, for example, has the Federal Reserve in Washington, the organization that manages the U.S. dollar, and European Central Bank in Frankfurt manages the euro, and all other flat currencies also have centralized oversight bodies. However, cryptocurrencies don’t have a central authority; rather, the cryptocurrency community and, in particular, cryptocurrency miners and network nodes manage them. For this reason, cryptocurrencies are often referred to as trustless. Because no single party or entity controls how a cryptocurrency is issued, spent, or balanced; you don’t have to put your trust in a single authority. Trustless is a bit of a misnomer. Trust is baked into the system. You don’t have to trust a single authority, but your trust in the system and fully auditable codebase is still essential. In fact, no form of currency can work without some form of trust or belief. (If nobody trusts the currency, then nobody will accept it or work to maintain it!) In the trustless cryptocurrency world, you can still trust the cryptocurrency community and its mechanisms to ensure that the blockchain contains an accurate and immutable — unchangeable — record of cryptocurrency transactions. Cryptocurrencies are established using a set of software rules that ensure that the system can be trusted, and the mining process is part of this system that allows everyone to trust the blockchain. Cryptocurrencies have no central bank printing new money. Instead, miners dig up new currency according to a preset coin-issue schedule and release it into circulation in a process called mining. So why is the process called cryptocurrency mining? When you compare cryptocurrency mining to gold mining, the name becomes clear. In both forms of mining, the miners put in work and are rewarded with an uncirculated asset. In gold mining, naturally occurring gold that was outside the economy is dug up and becomes part of the gold circulating within the economy. In cryptocurrency mining, work is performed, and the process ends with new cryptocurrency being created and added to the blockchain ledger. In both cases, miners, after receiving their reward — the mined gold or the newly created cryptocurrency — usually sell it to the public to recoup their operating costs and get their profit, placing the new currency into circulation. The cryptocurrency miner’s work is different from that of a gold miner, of course, but the result is much the same: both make money. For cryptocurrency mining, all of the work happens on a mining computer or rig connected to the cryptocurrency network — no burro riding or gap-toothed gold panners required! The role of the crypto miner Cryptocurrency miners add transactions to the blockchain, but different cryptocurrencies use different mining methods, if the cryptocurrency uses mining at all. (Most cryptocurrencies don’t use mining.) Different mining and consensus methods are used to determine who creates new blocks of data and how exactly the blocks are added to the blockchain. How you mine a particular cryptocurrency varies slightly depending on the type of cryptocurrency being mined, but the basics are still the same: mining creates a system to build trust between parties without needing a single authority and ensures that everyone’s cryptocurrency balances are up-to-date and correct in the blockchain ledger. The work performed by miners consists of a few main actions: Verifying and validating new transactions Collecting those transactions and ordering them into a new block Adding the block to the ledger’s chain of blocks (the blockchain) Broadcasting the new block to the cryptocurrency node network The preceding cryptocurrency mining process is essential work, needed for the continued propagation of the blockchain and its associated transactions. Without it, the blockchain won’t function. But why would someone do this work? What are the incentives for the miner? The bitcoin miner actually has a couple of incentives (other cryptocurrencies may work in a different manner): Transaction fees: A small fee is paid by each person spending the cryptocurrency to have the transaction added to the new block; the miner adding the block gets the transaction fees. Block subsidy: Newly created cryptocurrency, known as the block subsidy, is paid to the miner who successfully adds a block to the ledger. Combined, the fees and subsidy are known as the block reward. In Bitcoin, the block subsidy began at 50 BTC. (BTC is the ticker symbol for bitcoin.) The block subsidy at the time of writing was 12.5 BTC. The block subsidy is halved every 210,000 blocks, or roughly every four years; around May 2020 it halved again to 6.25 BTC per block. The image below, from the BlockChain.com blockchain explorer, shows a block subsidy being paid to an address that is owned by the miner who added the block to the blockchain. Near the top you can see that 12.5 BTC is being paid as the subsidy; the actual sum received by the miner (the full reward, 13.24251028 BTC) is larger, because it also includes the transaction fees for all the transactions in the block. Making cryptocurrency trustworthy For a cryptocurrency to function, several conditions must be met by the protocol. Jan Lanksy’s 6-factor list is particularly helpful. (Jan is a cryptocurrency academic and PhD of Computer Science and Mathematics at The University of Finance and Administration in Prague). As can be seen, below, mining (in the mineable cryptocurrencies, non-mineable currencies have different mechanisms) is an integral part of making sure these conditions are met. The system doesn’t require a central authority and is maintained through distributed consensus. That is, everyone agrees on the balances associated with addresses in the blockchain ledger. Mining is an integral part of adding transactions to the blockchain and maintaining consensus. The system keeps track of cryptocurrency units and their ownership. Balances can be proven at any point in time. Mining adds transactions to the blockchain in a way that becomes immutable — the blockchain can’t be changed. If the blockchain shows your balance is five bitcoin, then you absolutely do own five bitcoin! The system defines whether new cryptocurrency units can be created, and, if so, the system defines the circumstances of their origin and how to determine the ownership of these new units. A fixed issuance or inflation rate is predefined. Mining provides a way to release new cryptocurrency into circulation at a predetermined, controlled rate, with ownership being assigned to the miner. Ownership of cryptocurrency units is proved through cryptography. The three conditions of authenticity, nonrepudiation, and immutability are met, through the use of cryptography. Miners, using cryptography, verify that transaction requests are valid before adding them to a new block. The miner verifies that the transaction request is for a sum that is available to the owner of the crypto, that the owner has correctly signed the request with his or her private key to prove ownership, and that the receiving address is valid and able to accept the transfer. The system allows transactions to be performed in which ownership of the cryptographic units is changed. Transactions can be submitted only by senders who can prove ownership of the cryptocurrency being transferred. Cryptocurrency owners prove ownership by signing transactions using the addresses associated private key. Mining is the process through which transactions are accomplished, and miners verify ownership before adding the transaction to the blockchain. If two different instructions for changing the ownership of the same cryptographic units are simultaneously entered, the system performs at most one of them. There is no ability for someone to double-spend the same unit. The problem of double-spending was one that weakened earlier digital currencies. But with modern cryptocurrencies, miners vet transactions, searching the blockchain record of transactions to determine whether the owner actually has sufficient balance at that moment. If a sufficient balance isn’t accounted for within the spend address (the Input address) in the transaction request, the transaction will be rejected by the node software and never mined onto the blockchain. Also, if the same sender has two or more pending transaction requests, but doesn’t own enough cryptocurrency to cover them all, miners can decide which of the requests is valid. Additional transactions will be discarded to avoid double-spending the same currency. If even one of these six conditions aren’t met, a cryptocurrency will fail because it can’t build enough trust for people to reliably use it. The process of mining solidifies and satisfies every single one of these conditions. The Byzantine Generals There’s a mind exercise known as the Byzantine Generals Problem (or the Byzantine Fault, the error avalanche, and various other things) that illustrates the problem that cryptocurrency consensus algorithms seek to solve. The overall problem? You’re trying to reach consensus; in cryptocurrency, you’re trying to reach agreement over the history of currency transactions. But in a cryptocurrency network, a distributed computer system of equals, you have thousands, maybe tens of thousands of computers (nodes); in the Bitcoin network you currently have 80,000 to 100,000 nodes. But out of those tens of thousands of systems, some are going to have technical problems; hardware faults, misconfiguration, out-of-date software, misfunctioning routers, and so on. Others are going to be untrustworthy; they’re going to be seeking to exploit weaknesses for the financial gain of the people running the node (they are run by “traitors”). The problem is that for various reasons, some nodes may send conflicting and faulty information. So someone came up with a sort of parable or metaphor, the Byzantine Generals Problem. (A guy named Leslie Lamport Shostak first told this story back in 1980, in a paper related to general issues of reliability in distributed computer systems.) Originally named the Albanian Generals Problem, it was renamed after a long-defunct empire so not to offend any Albanians! Apparently distributed-computing academics like to sit around and devise these little metaphors; there’s the dining philosopher’s problem, the readers/writers problem, and so on. In fact the Byzantine Generals Problem was derived from the Chinese Generals Problem. Anyway, the idea is this, as described in the original paper: “We imagine that several divisions of the Byzantine army are camped outside an enemy city, each division commanded by its own general. The generals can communicate with one another only by messenger. After observing the enemy, they must decide upon a common plan of action. However, some of the generals may be traitors, trying to prevent the loyal generals from reaching agreement. The generals must have an algorithm to guarantee that A. All loyal generals decide upon the same plan of action….[and] B. A small number of traitors cannot cause the loyal generals to adopt a bad plan.” That’s the problem that cryptocurrency consensus algorithms, as they’re known, are trying to solve. How do the generals (the computer nodes) come up with consensus (all agree on the same plan of action—or transaction ledger), and avoid being led astray by a small number of traitors (faulty equipment and hackers)? Looking at the cryptocurrency miner To have a chance at the mining reward, crypto miners must set up their mining rigs (the computer equipment) and run that cryptocurrency’s associated mining software. Depending on how many resources the crypto miner is committing, he or she will have a proportional chance to be the lucky miner who gets to create and chain the latest block; the more resources employed, the higher the chance of winning the reward. Each block has a predetermined amount of payment, which is rewarded to the victorious miner for their hard work to spend as they wish. So how is the winning miner chosen? That depends. In most cases, one of two basic two methods are used: Proof of work: Under the proof of work method, the miner has to carry out a task, and the first miner to complete the task adds the latest block to the blockchain and wins the block reward, the block subsidy and transaction fees. Bitcoin and other cryptocurrencies, such as Ether (for now, it may switch to Proof of Stake at some point), Bitcoin Cash, Litecoin, and Dogecoin, use proof of work. Proof of stake: In the proof of stake system, the software is going to choose one of the cryptocurrency nodes to add the latest block, but in order to be in the running, nodes must have a stake, generally meaning that they must own a certain amount of the cryptocurrency. The cryptocurrency network chooses the miner who will add the next block to the chain based on a combination of random choice and amount of stake — for example, with some cryptocurrencies, the more cryptocurrency owned and the longer it has been owned, the more likely the miner is to be chosen. (It’s like owning lottery tickets; the more you own, the more likely you are to win.) With other cryptocurrencies, the choice is made sequentially, one by one, from a queue of preselected miners. When Bitcoin first started, anyone with a simple desktop computer was able to mine. The would-be miner simply downloaded the Bitcoin mining software, installed it, and let the BTC roll in! As time went on, though, competition increased. Faster and more powerful computers were built and used for mining. Eventually, specialized processing chips called Application Specific Integrated Circuits (ASICs) were developed. An ASIC, as the name implies, is a computer chip designed for a specific purpose, such as displaying high-resolution graphics quickly, running a smartphone, or carrying out a particular form of computation. Specific ASICs have been designed to be highly efficient at the forms of computation required for cryptocurrency mining — for example, for Bitcoin mining. Such a chip can be 1,000 times more efficient at Bitcoin mining than the chip in your PC, so in today’s Bitcoin mining environment, it’s go ASIC or go home! For high-difficulty cryptocurrencies, such as Bitcoin, the ideal mining environment is one with: Low hardware costs: Those mining rigs aren’t free. Low temperatures: Lower temperatures make cooling your mining rigs easier. Low electricity costs: Mining rigs can use a lot of power. Fast, reliable Internet connections: You need to be communicating with the cryptocurrency network rapidly with minimal downtime because you’re in competition with other miners. Fear not, though! With many different copies and mimicry of Bitcoin running rampant, Bitcoin is no longer the only game in town, and you can find lots of alternative mining choices, with varying levels of required computing power. Today, some of the most profitable cryptocurrencies to mine are lesser known and can be mined using off-the-shelf computer hardware due to less stringent difficulty levels that are associated with lower popularity and adoption. Currently, a large portion of the global cryptocurrency mining takes place in China, at perhaps three times the rate of the next closest nation (the United States). A combination of cheap electricity and easy access to cheap computer components for building mining rigs gives China an edge that Chinese miners have leveraged and so far, maintained, even with their government’s apparent disapproval of cryptocurrencies. This is a testament to how resilient and difficult to shut down distributed cryptocurrency systems such as Bitcoin are. Making the crypto world go ’round A cryptocurrency has value because a large number of people collectively believe that it does. But why do they believe cryptocurrency has value? The answer is trust. A holder of Bitcoin can trust that their Bitcoin will be in their wallet a day from now or 10 years from now. If they want to research how the system works, they can audit the code base to understand the system on a deeper level to see how trust is maintained. However, if they do not have the skillset or the computer science knowledge to audit code, they can choose to trust that other people, more knowledgeable than them, understand and monitor the system; they can trust the overall blockchain community that is managing the particular cryptocurrency. Without the mining functionality underpinning the distributed peer-to-peer cryptocurrency system, this collective trust (based on the proof of collective work towards the chain) would not exist. Cryptocurrency mining makes sure that your balances won’t change without your authorization. It incentivizes everyone to behave correctly and punishes those who don’t. It creates a digital form of value transfer that can be trusted by each individual user as an equal peer in the network because every part of the system is aligned for one purpose: providing a secure way to create, verify, and transfer ownership of digitally scarce cryptographic units.

Cheat Sheet / Updated 02-07-2022

Bitcoin ― what an enigma! It seemingly came out of nowhere, and 13 years later is worth hundreds of billions of dollars, even though few people understand how it works. The information in this Cheat Sheet should help reduce some of the mystery and confusion so that you can begin your Bitcoin journey with confidence.

Cheat Sheet / Updated 12-08-2021

Cryptocurrency All-in-One For Dummies provides helpful advice for navigating the blockchain world and cryptocurrencies that run them — from the ins and outs of wallets, exchanges, Bitcoin, and Ethereum to investing in cryptocurrencies and even mining your own. Here, we give you bonus content that we couldn’t fit in the book. Explore crypto’s basic components, real-world-use cases for blockchain, what to consider before investing in cryptos, important reminders to keep you safe on the blockchain, how to determine which crypto is profitable to mine, and several resources to help you learn even more about the wide world of cryptocurrencies.

Article / Updated 07-06-2021

A ton of helpful resources are online for aspiring cryptocurrency miners or those interested in learning more on the topic. These cryptocurrency mining resources are split into ten different categories, from resources that can help you track the price of cryptocurrencies to cryptocurrency whitepapers. Reviewing these resources can keep any aspiring crypto miner busy for many happy hours! Cryptocurrency market trackers Following are sites that provide aggregated exchange rates and market capitalization for cryptocurrencies, a few of the more reliable sources in the industry. Note that in some cases exchanges have fed bad data to the tracking sites, but in general, the data is good: Coincap CoinMarketCap Messari OnChainFX CryptoCompare CoinLore WorldCoinIndex Cryptocurrency mining profitability estimation tools Use these tools often when considering which cryptocurrency to mine and when thinking about expanding. Here is a quick list of some popular profitability tools: CoinWarz WhatToMine Crypto Mining Tools Cryptocurrency Reddit pages Reddit is among one of the top social media sites for cryptocurrency communities to discuss and debate the trending topics of the day. Check out this list of some of the top cryptocurrency Reddit pages. If you need a different one, just add your cryptocurrency’s name or symbol to the end of the URL; some cryptocurrency reddits use the name, some the symbol — for example, www.reddit.com/r/XRP/ and www.reddit.com/r/zcoin/. Due to conflicts, some can use neither and have to come up with something else (TRON uses www.reddit.com/r/TRXTrading/, for example), so you may have to search. r/Bitcoin r/Ethereum r/BitcoinCash r/Litecoin r/DashPay r/ZEC r/DogeCoin Blockchain explorers Blockchain explorers provide an easy way to audit blockchains directly from your web browser. They can search for blocks, transactions, hashes, and addresses. Here’s a list of useful Bitcoin and Ethereum blockchain explorers. Blockchair also works with the Ripple, Bitcoin Cash, Litecoin, Bitcoin SV, Dash, Dogecoin, and Groestlcoin blockchains. For other cryptocurrencies, try a search engine query. Many smaller cryptocurrencies are not popular enough to have explorers, but some do. Check out these blockchain explorers: Bitcoin Blockchain Explorers BlockStream.info Blockchair.com Blockchain.com Blockcypher.com Cryptoid.info Oxt.me Tradeblock Ethereum Block Explorers. EtherChain.org EtherScan.io Other Blockchain Explorers Factom Solarcoin Lykke Data visualizations While blockchain explorers are good resources for finding textual and numerical data for your favorite blockchains, some creative individuals have taken this concept a step further. There are many visually appealing data visualizations for the Bitcoin and cryptocurrency space. Here are some of our favorites: Bitcoin Big Bang Market Value Visualizations Bitcoin Blocks earn.com BitBonkers Bitcoin Transaction Interactions OXT Landscapes space Bitcoin network graphs bitcointicker Statoshi Cryptocurrency data and statistics Cryptocurrency data, comparisons, and statistics websites can be very useful, helping you to compare cryptocurrencies. Here are several good cryptocurrency data aggregators: Coin Metrics BitInfoCharts Bitcoinity Coin Desk How Many Confirmations 51% Attack Cost Comparisons Bitcoin Visuals Dance Bitcoin Cash Metrics Cryptocurrency Wiki’s While Wikipedia.org has pages for most of the top cryptocurrencies, these pages are often fairly short descriptions and not a deep dive resource that can cover every aspect of a typical cryptocurrency. Not to worry, as some cryptocurrencies have their own (or multiple!) Wiki-style directories that define many of the terms and aspects associated with that cryptocurrency. Some of the following Wikis also cover other cryptocurrencies. For example, BitcoinWiki.org has information on not only Bitcoin but many other cryptocurrencies, too. Bitcoin Wiki Litecoin Wiki Ethereum Wiki Ethereum Wiki Github Ethereum Wiki Cryptocoins Wiki Lopp.net resources Jameson Lopp is an active user and developer in the bitcoin space, and he has compiled a very extensive list of resources curated from the Bitcoin community in a single location. You can find handy tools, user guides, and many other helpful resources on his site. Cypherpunk Manifesto The Cypherpunk Manifesto, written by Eric Hughes, is a foundational document that many cryptographers and cryptocurrency users have read over the years. It’s an interesting introduction to the politics behind the origins of cryptocurrency. Cryptocurrency white papers The Bitcoin and cryptocurrency explosion that has occurred over the past decade all started out with Satoshi Nakamoto’s release of his idea to the Cypherpunk Mailing List (archives located here), some code, and an accompanying whitepaper. Since then, many (countless?) whitepapers have been released, describing a wide variety of cryptocurrency and blockchain systems. Check out this shortlist of links to read some of the most popular cryptocurrency whitepapers over the past decade. You can search for others, of course, but many cryptocurrencies were launched without whitepapers (Litecoin and Dogecoin, for example). Bitcoin Ethereum Original Ethereum Updated ZCash Monero The Satoshi Nakamoto Institute The Satoshi Nakamoto Institute site contains the entire known writings of Satoshi Nakamoto (whoever he/she/they is/are!), along with numerous other documents that “serve to contextualize Bitcoin into the broader story of cryptography and freedom.” It’s required reading and a great way for Bitcoin and cryptocurrency enthusiasts to go down the rabbit hole.

Article / Updated 07-02-2021

Cryptocurrency mining has changed significantly since its inception. Newer cryptocurrencies are breaking from the old ways of PoW (proof of work) algorithms and using Proof of Stake instead. In the early days of cryptocurrency, PoW was the only game in town, and new cryptocurrencies primarily copied Bitcoin as the model and a starting point for their slightly different ideas and implementations. Over time, however, some involved in cryptocurrency recognized the downsides to PoW and set out to find a better way of securing a cryptocurrency, soon settling on POS — proof of stake. The idea is to make miners stake their cryptocurrency as an entry ticket for adding blocks to the blockchain and earning transaction fees. The penalty for adding invalid transactions to the blockchain ledger would be loss of the coins staked. This was first proposed in 2011 by a user of the Bitcointalk.org forum. In 2012, the whitepaper for Peercoin, which expounded and solidified this idea, was published, describing a new system for securing and reaching blockchain consensus that was much less resource intensive than pure proof of work. (While Peercoin is technically hybrid proof of stake/proof of work, this marked the first real world implementation involving proof of stake.) Today, proof of stake, along with its hybrid use (hybrid proof of stake/proof of work), helps secure and maintain trust for a few somewhat successful cryptocurrencies. While still considered the more unproven of the two main consensus systems, proof of stake has some benefits over proof of work. proof of stake should be understood by any cryptocurrency miner worth their salt. (And you can potentially profit it from it, too!) Proof of stake explained Proof of stake is similar to proof of work — it’s used to maintain consensus and keep the cryptocurrency ledger secure — but with one major difference: There’s way less work! Instead of using a specialized mining rig to calculate a targeted hash, a miner who wants to create a new block chooses to stake an amount of the cryptocurrency they want to mine. Staking can be thought of like making a refundable deposit, and the purpose behind its requirement is to prove that you have a vested interest in the welfare of whatever cryptocurrency you’re mining. In other words, before you can mine the cryptocurrency, you must prove that you own some of it, and you must stake it during the mining process; that is, you can’t just show you own it, sell it, and continue mining. The stake is locked during the mining process. As with Bitcoin, a miner has to be selected to add transactions to the blockchain; one miner wins the contest. Different cryptocurrencies use different methods for making that selection, but whatever method is used, that selection is made, and the lucky miner is chosen to create and chain a new block of transactions, collecting all of the transaction fees from this new block. The nice thing is, the block being chained can be less computationally expensive and thus created by any computer capable of running that cryptocurrency’s node software, if an adequate amount of cryptocurrency is staked. This, in effect makes most computers capable of functioning as proof-of-stake miners. The catch is that blocks are rewarded proportionally to the amount of coins staked, making for a less even coin distribution among miners in comparison with proof-of-work-based systems. It’s important to note that fewer block rewards are to be won in proof-of-stake cryptocurrencies, as the vast majority of coins issued are generally pre-mined up front prior to the currency’s genesis block. The lack of work required to mine a proof-of-stake crypto, along with the fact that there are minimum mining rewards besides the transaction fees, has given rise to the terms minting or forging being used to describe this process rather than mining. At the end of the day, though, proof of work and proof of stake attempt to serve the same purpose: Ensuring everyone in the network agrees that new transactions in the latest block are valid, and properly chaining them to a cryptocurrency’s blockchain record. Proof-of-stake selections In proof-of-stake systems, you have to prove that you own a certain amount of the currency you are mining; you have to put up a stake to play the game. Different currencies have different PoS mechanisms, of course, but here are the basic concepts. First, before you can play the game and have a chance of becoming the miner who adds a block to the blockchain, you need a stake. You have to have some of the cryptocurrency in your wallet, and, with some currencies, it has to have been there for a certain amount of time. Peercoin, for example, requires that the currency has been sitting in the wallet for at least 30 days. Other currencies, though, don’t have this limitation. Note, however, that in some systems, while staking your currency can’t be used; it’s locked up in your wallet and may be locked up for a specified minimum time, and in fact if you attack the system in some way you stand to lose the stake. In other systems, this isn’t the case; merely having currency in your wallet is enough to count as a stake. Some PoS systems have a concept of coin-age. That is, you multiply the number of coins in the wallet by the time they have been in there. A miner who holds 10 coins that are 60 days old (10 x 60 = a coin age of 600) will have a better chance of being selected than one who holds 5 coins that are 90 days old (5 x 90 = a coin age of 450). There may be minimum and maximum lengths of time for the coins; in Peercoin, the coins must have been in the wallet for at least 30 days, but coins in the wallet that have been there more than 90 days are not counted. (This is to ensure that the blockchain is not dominated by very old or large collections of coins.) Also, the miner who wins has the clock on the staked coins restarted; those coins can’t be used for another 30 days. Blackcoin has a simpler concept; your stake is simply the amount of the cryptocurrency in your wallet that you have assigned as your stake. But the stake is not enough. If miner selection were based purely on the coin age of the stake, the richest guy would always win, and would add the block to the blockchain every time. So PoS systems must have some element of random selection. The staked coins, or the coin age of your stake, determines how many tickets you buy in the lottery, but the winning ticket still has to be selected through some kind of random selection, and different PoS cryptocurrencies use different methods. More tickets owned (a higher coin or coin-age stake) means your chance of winning is greater, but through chance even someone with a fraction of your stake may win.) As Blackcoin says (Blackcoin.org), “Staking is a kind of lottery. Some days you'll get more than usual, some days less.” Blackcoin uses a randomization method that is a combination of a hash-value contest and the coin stake; miners combine the amount of stake and the staking wallet address, and the miner with the most zeros in front of their hash wins. The richest and longest-owning cryptocurrency miners typically have an advantage for winning the right to create new coins and chain blocks into a PoS blockchain. In fact, as Blackcoin explains, “If you stake with more coins, you get more blocks and you are more likely to find a reward. Someone staking 24 hours a day, 365 days a year would get more (~24x) than someone staking the same amount of coins an hour a day. Over time, stakers earn Blackcoin in proportion to the amount of money they stake and how long they stake it, and in general that’s true of all simple PoS systems. PoS example cryptocurrencies There have not been many successful examples of cryptocurrencies deployed that use pure proof of stake; most deploy a hybridized approach. However, a couple of noteworthy blockchains have used this technology for a consensus mechanism: NXT was created in 2013 and deployed using a pure proof-of-stake implementation. Today, it is not widely used, but still in existence. Blackcoin is a cryptocurrency that was released in early 2014 and also functions on a pure proof-of-stake consensus mechanism. Again, it’s a relatively small cryptocurrency by value and not widely used. Upsides to proof of stake The most obvious upside to proof of stake is the reduced energy consumption when compared to proof of work. Rather than consuming the same amount of electricity as a small country, under proof of stake, the blockchain can be managed with significantly less energy. The scalability under proof of stake is also greatly increased. While Bitcoin and similar proof-of-work cryptocurrencies struggle to get double digit transactions per second on the main chain (Bitcoin is around 8), by utilizing proof of stake, the transaction capability can get into the thousands or even hundreds of thousands per second depending on the number of validating nodes being utilized (the fewer, the faster generally). With the reduction in cost to those who want to validate a proof-of-stake cryptocurrency, the transaction fees are also correspondingly lower. Miners don’t have to purchase expensive mining rigs, so creating blocks can be accomplished at a lower energy and equipment price. While this does impact overall revenues for miners in proof of stake, the relative ease to start mining and low overhead cost still make mining proof-of-stake cryptos a viable option for those that want to experiment. And don’t forget, more transactions per second also means more fees per second! Downsides to proof of stake The stakes are high when it comes to securing a cryptocurrency and maintaining consensus. In a purely proof-of-stake system, two main issues cause concern. The first is the problem of originally distributing a new PoS cryptocurrency. Some cryptocurrencies have both premined coins, and, once the network is running, mined coins. Frequently most of the cryptocurrency in circulation, for many PoS systems, is premined, which creates a large barrier to entry to miners who want to get involved later. If you want to mine, you have a huge advantage if you already have large amounts of the cryptocurrency to stake right from the beginning. And the more centralized ownership is, the less distributed trust the network has due to the ability of large holders to vote selfishly using their coins, to propagate a chain history that most benefits the larger coin holders. This could result in manipulation of the blockchain ledger to the advantage of the large coin holders, such as double spends, selfish issuance, and upgrades that go against the best interests of other users. The second problem with pure proof of stake is called “nothing at stake.” This is a theory that says in PoS systems, validators (miners) are not interested in consensus, because it may be in their financial interest to add invalid blocks to the blockchain, leading to forks in the blockchain, creating multiple chains. That is, if one validator adds an invalid block, other crypto miners may accept it and build on it, because they will earn transaction fees on whatever chain wins. (And because it’s a PoS system, it doesn’t take much computational power to do so.) This leaves open the possibility of the blockchain being manipulated by those that hold the largest stake in that system, which is the opposite of the very purpose of cryptocurrency, which was to eliminate the idea of the traditional banking system and its centralized and manipulatable ledger system. Under proof of work, this issue would be resolved quickly, as the miners are incentivized to quickly resolve which fork of the blockchain to follow so precious mining rig resources are not wasted. The invalid block is orphaned, meaning that no new blocks will be built on top of it, and business continues as usual with only a single blockchain. Under proof of stake however, it is very easy to continue building new blocks on each chain, and in theory, the blockchain could easily fork. There is a negligible cost to validating multiple chains, and if that occurs, the decentralized consensus mechanism has failed. With proof of work, chain reorganizations occur naturally as orphaned blocks, also known as uncles, have their transactions placed back into the mempool and, regardless of which chain tip becomes confirmed eventually, the transactions and blockchain maintains validity.

Article / Updated 07-02-2021

After you have your hardware running, you’ll need to install the appropriate software to mine cryptocurrency. The software you’ll use depends on whether you’re pool mining or solo mining, your hardware setup (ASIC, GPU, or CPU), and the particular cryptocurrency you plan to mine. In some cases, the mining software replaces the entire operating system (ethOS and Braiins OS, for example), but in other cases, the software is application software that runs within another operating system, typically Microsoft Windows, Linux, or Apple’s macOS (such as Multiminer, niceHash, and Honeyminer). Pool mining software Pool mining is a cooperative mining system in which thousands of individual crypto miners work together to mine blocks and share in the rewards proportional to their individual contributions of hash power. Pool mining is recommended for steady and consistent mining rewards. Some work with all three, while some with only one of these systems. If you bought an ASIC or a prebuilt GPU rig, your rig most likely already has mining software installed on it. ASIC mining rigs generally come equipped with a manufacturer-provided operating system (running on the ASIC’s control board), with a simple graphical user interface. You will work with this operating system from another computer, connected to your local network; you’ll use a web browser to navigate to the unit’s IP address on the LAN. See the manufacturer’s documentation to properly set up the mining software. If you purchased a prebuilt GPU frame, that most likely comes with an operating system and mining software, too. However, many of these manufacturer-provided systems are not open-source. Some implementations have been prone to issues, such as backdoors, remote monitoring, and lack of full overclocking or other efficiency limitations, so miners often replace their manufacturer’s software. (If you’re interested in finding out more about possible efficiency limitations or back doors, search for bitmain asicboost scandal and antbleed scandal.) Lots of downloadable programs are specifically designed for mining cryptocurrencies. However, many of them are from unreliable sources, and some may include malware or other computer viruses. To avoid that issue, here is a list of a few reliable mining software programs designed to mine towards pools. ethos: This Linux-based mining operating system for a GPU cryptocurrency mining rigs is highly recommended for pool mining GPU applications and is easy to install, set up, and operate (for people who have worked with Linux software!). ethOS currently supports mining Ethereum, ZCash, Monero, and others.ethOS is free software licensed under the General Public License (GNU), but it is highly recommended that you purchase a copy to support the ongoing development of the software. (While free, it is not open source; it is, according to the website, provided under the “Small Goat with Red Eyes’ license. You should buy one ethOS from gpuShack.com per each rig on which you intend to run ethOS. If you don't, a small goat with red eyes will visit you while you sleep”). The software can be directly downloaded, or you can purchase a preloaded flash drive or SSD. Follow the documentation to get your mining rig fully set up and hashing. H4SHR8: HashrateOS is a mining operating system for both GPU and ASIC mining hardware. It is a Linux-based operating system and is specifically designed to mine cryptocurrencies. It will support multiple mining algorithms and hardware deployments. It hasn’t been released to the public yet, but may be available soon. niceHash: This is a pool-mining service and mining configuration software (that also allows people to buy and sell hash rate) for a wide variety of different cryptocurrencies. niceHash is specifically designed to mine via GPUs, ASICs, and CPUs and runs only on the Windows operating system. So, you could GPU mine by installing it into the Windows operating system installed in your mining rig and CPU mine by running it on a Windows PC to use that computer’s CPU. To ASIC mine, you use its instructions to point your ASIC rig to its server. Follow the documentation to get your mining rig fully set up and hashing. Honeyminer: Honeyminer is another pool mining service that provides its own software for you to work with (Windows and Apple’s macOS). You can use it on your desktop computer (or GPU mining rig, if Windows is installed) to mine using whatever CPU and GPUs the software finds. It will mine toward whatever cryptocurrency is most profitable, but pays out rewards in Satoshi, the smallest denomination of bitcoin. Follow the documentation to get your mining rig fully set up and hashing. Easyminer: This free, open-source mining tool allows for the mining of various coins, such as Bitcoin, Dogecoin, Litecoin, and others. Easyminer can be configured to mine with CPUs, GPUs, ands ASICs and can mine pointed to a pool as well as solo mining. It runs only in Microsoft Windows. Hive OS: Hive OS is a free operating system for up to three mining rigs, but requires a monthly fee for larger deployments. It can be configured to mine with CPUs, GPUs, as well as ASIC,s and can mine a variety of different hashing algorithms. SimpleMiningOS: SimpleMiningOS is Linux-based operating system for GPU-mining has a monthly fee of $2 for a single rig (declining in cost the more rigs you run). It supports mining toward Ethereum as well as a wide variety of other cryptocurrencies. Braiins OS: Braiins OS is a great alternative to manufacturer-provided web-based GUIs when mining bitcoin on ASIC rigs. It is an open source, completely auditable, operating system designed for the Antminer S9 and the DragonMint T1 ASICs (maybe more by the time you read this). In some hardware situations, it allows for an increase in hash power with the same electricity expenditures, increasing your efficiency and returns. Follow the documentation and installation guide to flash the operating system software to your mining rig’s control board to get set up and hashing toward your chosen pool. Mother of Dragons: Mother of Dragons is software that runs on your Linux computer (implementations, such as Debian, Ubuntu, or CentOS), or other LAN-connected Linux-based device, such as a Raspberry Pi (a tiny, cheap, single-board computer). You enter your settings — pool server, user, password, clock speed, fan speed — and then the software automatically detects ASIC miners (of the DragonMint/Innosilicon T1/T2/B29/B52/A9 variety) connected to your network and changes their settings. It has a built-in monitoring system and will also update firmware for your ASICs as well as reboot any miners that fall offline. It saves quite a bit of work, but is built for the expert user. Follow the documentation on the following GitHub page for set up instructions: MultiMiner MultiMiner is an open-source mining tool designed for Windows, Linux, and macOS. It is designed to work with GPUs, ASICs, and FPGAs (Field Programmable Gate Arrays). MultiMiner actually uses the BFGMiner mining engine in combination with an easy-to-use interface for simple configuration and monitoring. It can be configured to mine toward pools and, similar to Mother of Dragons, it has monitoring systems and automatic updates. While setting up pool-mining software designed for Windows and macOS to run on your laptop or desktop PC is generally pretty simple, working with some of these other systems can be far more complicated. Setting up, say, ethOS or Braiins OS can be fairly straightforward for an experienced Linux user. However, if you’ve never left the Windows or macOS operating systems or your idea of dealing with a complicated software installation process is letting your employer’s tech guy have the computer for the afternoon, then some of this stuff will be out of your zone of experience! You’ll either need to find a friendly geek to help or understand that you will have to read instructions very carefully and quite likely will expend serious amounts of time learning how to get the job done. Most mining software is designed for ASIC and GPU mining because they are the most efficient systems and the sorts of systems used by most experienced miners. The non-ASIC cryptocurrencies, such as Monero, are an exception, as they are intended to be mined with CPUs and GPUs. (If you can GPU mine, you can CPU mine, too, but GPUs are far more powerful.) Some mining programs do work with CPUs. However, in many cases miners who are CPU mining Monero or smaller cryptocurrencies simply use the core software — the software provided by the cryptocurrency itself — either on the cryptocurrency website or from the cryptocurrency’s GitHub account. However, CPU mining profitably is difficult. Most Monero miners are GPU mining, though they often use the CPU in the GPU rig in addition. It’s generally not worth it to CPU mine. If you do intend to mine with your CPU, probably the only software it makes sense to use are the niceHash and Honeyminer programs. Solo mining software Solo mining is not recommended unless you have very carefully run the numbers and are sure it makes sense. You need to fully understand and accept your odds (which may be low), or you need significant enough network hash rate to ensure profitability. With that said, quite a few software implementations allow for configurable solo mining. Most solo mining tools require that you download and sync a full node of the cryptocurrency you intend to mine on a separate computer system on your network and then point the software running on your ASIC or GPU mining rig to the full node on that computer. Heavily research the documentation for the software you plan on using before firing up your mining equipment. Check out the following list of solo-mining software: Core Cryptocurrency Software: Some cryptocurrencies, such as Monero, have mining functionality built into the GUI of their core full-node software (Bitcoin did at one point, too, though it’s been removed). Simply download their core node, sync up to the blockchain (this may take a while), and enable mining under the Mining tab. Refer to the cryptocurrency’s main site for the software download and documentation. CGMiner: CGIminer is open-source software created for bitcoin mining with ASICs or FPGAs and runs on Linux, Windows and macOS. Its codebase is also open source. BTCMiner: BTCMiner is a bitcoin mining software designed for FPGA mining that is open source. It runs on Windows or Linux. BFGMiner: BFGMiiner is free and open source software for Windows, macOS, and Linux can be configured for mining with CPUs, GPUs, FPGAs, and ASICs.

Article / Updated 07-01-2021

In the cryptocurrency mining space, revenue is important, and profit is critical. You do not want to spin your computational hash cycles for zero gain, and you want your investment of time, mining hardware, electricity, and other expenses to pay off. These ten tips will help you become profitable and receive a return on investment (ROI) in your cryptocurrency mining adventure. Do your homework before you start mining Doing plenty of research and study prior to jumping into the cryptocurrency mining space in any capacity is crucial. It’s a complicated arena, with plenty of room for error, and cryptocurrency mining is not a quick walk in the park. If the mining gear you plan to acquire and deploy is not profitable or the market is in the midst of a large downturn, you may be much better off simply buying the underlying cryptocurrency asset you intend to mine from an exchange. Setting up hardware and software can be complicated, too, in particular if you decide to build a GPU mining rig from the ground up! Before you start, study. There is no rush! It’s better to take your time and get everything right than to jump in without being fully prepared and lose money. Better in fact, if your research leads you to not mine cryptocurrency, than if you do little research, jump right in, and fail. If the cryptocurrency markets survive and is no short-term fad, you have plenty of time to get in and mine. And if they don’t? Well, you haven’t lost anything, have you? Time your entry into the cryptocurrency mining world There are good and bad times for cryptocurrency mining. For example, during the bitcoin and cryptocurrency market boom in 2017, mining hardware was practically sold out from many of the original mining equipment manufacturers. Much of the most efficient and cost-effective (profitable) cryptocurrency mining equipment was being resold on second-hand marketplaces at prices above the brand-new-from-a-manufacturer price, virtually eliminating any projected gains of mining with that gear. And, of course, the market declined dramatically starting in late December 2017, and still, at the time of writing, has not fully recovered. (It’s still around three to four times its post-December 2017 low, though.) While December 2017 would have appeared, to many outsiders, to be a great time to get into cryptocurrency mining, the conditions were actually quite poor, and hardware speculators were extracting as much out of the market as they possibly could. Often, in the bitcoin and cryptocurrency space as with many traditional markets, the best time to enter into the fray may be when the perceived outlook is the worst. During these market downturns, bitcoin and other cryptocurrencies may trade at a reduced rate, and profitable mining hardware may hit second-hand marketplaces at steep discounts. You may be able to acquire hardware directly from manufacturers during this time as well. Baron Rothschild, an 18th-century member of the infamous banking family, reportedly said that you should “Buy when there’s blood in the streets, even if the blood is your own.” What he meant is that it’s a good time to buy when a market is crashing; you’ll buy the assets cheaply, and they’ll recover eventually. The timing of your entrance into the cryptocurrency mining space may very well determine your success. However, you may not want to wait too long, as the old cryptocurrency adage goes: “The best time to mine (or buy) cryptocurrency was ten years ago, the second-best time is now.” Play the cryptocurrency markets Many cryptocurrency miners increase their profits by actively trading on exchanges, even buying on one exchange and selling on another, exploiting the differences in prices between exchanges in a form of arbitrage. However, this subject is totally different from cryptocurrency mining, of course, requiring different skill sets, knowledge, and strategies. In many cryptocurrency markets, trading provides needed liquidity, and traders help absorb some of the volatility. Keep in mind that tax liabilities are likely incurred from actively trading. However, a few smart trades a year can multiply profits significantly, and if you do have a tax liability, that may be a good thing (it shows you have made gains on your trades!). Once the conversion has been made from mined cryptocurrency to local fiat currency, the mining ROI calculations for those mined cryptocurrency rewards are locked in. While quickly trading for fiat-based returns is an effective strategy for some miners to boost their ROI, it isn’t recommended for everyone. Tread and trade lightly. Identify low hash rate alternative cryptocurrencies If your ROI and profit calculations for the cryptocurrency you are mining show that you’re losing money, you have another option beyond mining through the downturn or shutting down your mining equipment and taking the loss on hardware investments. You can switch cryptocurrencies. Miners often study the mining profitability on other cryptocurrency blockchains to see whether they’d fare better mining a less popular cryptocurrency. Just because your current cryptocurrency market is in trouble, it doesn’t mean all cryptocurrency mining is unprofitable at the same time. You may be able to find a more profitable cryptocurrency. In fact, it’s often possible to find a smaller cryptocurrency that offers a better ROI than the larger, better known cryptocurrencies. These smaller cryptocurrencies generally have a lower price per coin on the exchanges, but price per coin is not an indication of profitability. What counts is how much equipment and electricity you need to use to mine each dollar’s worth of the coin. Smaller cryptocurrencies also have lower network hash rates, which means you can contribute a larger percentage of the hash rate and gain a larger percentage of the mining rewards. So, the coins you mine are worth less, but you will likely mine more of them. So keep an eye on other cryptocurrency markets, in particular the ones that you can mine. That is, if you’re mining with ASICs, you don’t need to watch all the other markets, just the other cryptocurrencies that work with the algorithm your ASIC was designed to mine. If you’re mining with a GPU rig, your choices are broader. You will have the flexibility to mine many different cryptocurrencies, using many different algorithms, on low hash rate cryptocurrencies. You’ll want to watch what’s going on with these other cryptocurrency markets, and of course, before you jump, you’ll need to run the numbers and see whether they work for you. Be careful, however, as many small market value and hash rate cryptocurrencies do not have the type of blockchain security that other cryptocurrencies boast. Smaller cryptocurrencies also tend to lose value over time, and may experience significant price fluctuations, so you’ll want to be quick on your feet. Get in when it makes sense, get out when things start to go badly. Mine the start of a chain Mining a brand new cryptocurrency can sometimes be very profitable (and, like everything in cryptocurrency, sometimes not). When a new cryptocurrency is launched, there is often a short period of euphoria, during which all the promises and hype of the launchers serve to pump up interest in the new currency. Typically, despite their propagators’ best efforts, the new currency does not last, or at least does not remain valuable. However, some of these new blockchains may have significant value for the first few days after launch, possibly even months, as originally the coins on these cryptocurrencies are inherently scarce (assuming there isn’t a large pre-mine associated with it), and traders may value them at a premium. A pre-mine is what those in the cryptocurrency space call a cryptocurrency blockchain that was launched with coins already in existence from nonmining activities, typically though a crowd sale, initial coin offering (ICO), or other early adopter distribution method. Pre-mined cryptocurrencies have been criticized by the mining community as being unfair and unfriendly to miners. Extreme early mining profitability has been the case for a few different coins in the past, including Zcash, Grin, and many others. You can see the example of Zcash in the CoinMarketCap chart below. In the first few hours of the cryptocurrency’s life, it reached more than $5,000; within a couple of days, it was worth a tenth of that value. This kind of profile is very common. Here’s a little experiment for you. Go to CoinMarketCap and experiment with a few charts. Pick some of the smaller, less popular cryptocurrencies and look at their charts. Adjust the date range to the first week or two, or month or two perhaps, of the cryptocurrency’s life, and you’ll frequently see the same kind of profile. In the image below, for example, you can see the first two months of WAX’s life. It started out around $4.60 to $5 a coin, but declined to around 50 cents within a couple of days. Thus, mining a brand-new cryptocurrency can (sometimes) be very profitable if you’re there right at the start. You can mine with GPUs, or even CPUs in some cases, as ASICs have not yet had the time to develop for their algorithm (unless, that is, the new cryptocurrency is using an existing, ASIC-developed, algorithm, of course). Unfortunately for many newly created cryptocurrency systems, healthy network effects and other aspects of a successful cryptocurrency are difficult to create, so many tend to lose value against other assets and local fiat currency over longer periods of time, or even fairly quickly. (Refer to the image above; WAX started high, but dropped within a couple of days.) However, there may still be an opportunity in some of these systems for enterprising miners who may be able to direct their computational hash power toward the chain early and quickly exchange their rewards for other more proven systems as well as for local fiat currency. (You’ll want to sell off your new coins within minutes or hours in some cases.) Start small with crypto mining The best way to test out the waters in any business endeavor, and particularly in the cryptocurrency mining industry, is to start small. This is especially true for beginners new to the space; you have a lot to learn, so your first mine will be a big experiment. Starting small also makes any losses less painful, of course. If you don’t manage to create a profitable mine, your losses are limited. Starting small is a great way to build the skill sets and learn the lessons needed, discovering what works well and what may not. Once you have everything figured out, then you can scale up. Scale choices Rapidly expanding in the cryptocurrency space can lead to many unforeseen issues, such as increased burn rate and an evaporated runway. However, you can scale your mining operation using other methods that may not involve getting large amounts of additional mining equipment online at your home, business, or other facility. Some miners scale by replacing aging equipment, which in many cases, due to hardware efficiency gains, can result in significant increases in hash rate while maintaining similar, or even lower, energy expenditures, which would increase mining profits and possible hasten ROI. Other miners may choose to use hash-rate market places to purchase mining capability from willing sellers. Another method to scale mining operations quickly is cloud mining where individuals can purchase large chunks of hash rate for their favorite cryptocurrency or algorithm from companies that specialize in managing mining equipment for miners. Any of these options are decent choices for expansion, but some of them come with inherent third-party risk. Do some profitability calculations to identify the risks of growing too quickly before diving into large new deployments of cryptocurrency mining equipment. Find cheap electricity for cryptocurrency mining Inexpensive electricity is very important for cryptocurrency mining endeavors because electricity is often the largest operational expenditure involved in cryptocurrency mining. Reduce your electricity cost, and you increase your profit, of course. Every dollar saved in electricity is a dollar that goes directly to your “bottom line.” Some mining equipment may be profitable running in one place, but not in another, simply due to the difference in electricity costs between both locations. Some areas of the world have significant seasonal fluctuations in electricity prices, so there are even examples of nomadic cryptocurrency miners who move their operations periodically to take advantage of inexpensive and excess energy. Migratory miners! Many enterprising miners have increased ROI by accessing energy resources that would otherwise go unused, with very little to no cost associated with them, in order to save significantly on electrical costs. These miners have resorted to capturing natural gas prior to being flared, excess hydroelectric capacity, wind, solar, or even geothermal energy. Since mining equipment typically runs 24/7, it has electrical load characteristics, such as a high load factor, which some electrical utilities will provide discounts for. An electrical load factor is a measure of electrical utilization rate over a given period of time. The equation for load factor is (average monthly load in kW)/(peak monthly load in kW) and is normally provided in percent. For example, if an S9 was running all month and didn’t shut off (as mining equipment typically does) and its peak load was 1.6kW, the load factor would be 100 percent: [(1.6 kW/1.6 kW) * 100 percent]. If you are running the equipment only half the time during the month, the load factor would be 50 percent: [(0.8 kW/1.6 kW) * 100 percent]. So it’s worth talking to your utility about the best rates they can provide, to see what rates would be tailored to the type of load pattern (a load factor that is close to 100 percent) that is inherent to most mining operations. In some cases, it may even make sense for a miner to run mining rigs only during low-cost electricity periods during the day. But run the numbers carefully. Obviously it means you’ll mine less cryptocurrency, and you need to understand the effect on profitability when taking into account the capital costs of your equipment; run just half the day, and you’re doubling the time it takes to pay for that equipment. For example, one miner recently switched to a new, hybrid residential/industrial rate that his electric utility introduced, which provides rates similar to industrial rates, saving him 20 to 40 percent on his energy costs compared to average residential rates in his area. This plan is a ToD (time of day plan) that saves money for people with high load factors — people who are running at a pretty steady, high load throughout the month. If you’re like most electricity consumers, you have no idea you had choices, right? You simply pay the bill they send you each month. But spend a little time digging through your utility’s rate structure and spend some time talking to them, and you may be surprised what you find. This really is a huge issue, in particular for miners who get beyond the hobbyist stage. Large, professional mines are all about finding cheap energy! Cool your mining equipment efficiently Mining equipment creates a lot of heat, but you can mitigate this heat exhaust or even use it to your advantage, to increase overall ROI. Some miners spend a lot of money running expensive air-conditioning systems to cool cryptocurrency mining hardware to datacenter temperature levels. However, cryptocurrency mining hardware is equipped with large heat sinks and powerful fans and is typically rated for higher temperatures than sensitive data servers (such as web servers) being held in datacenters. This is a little scary for people who are used to the idea that computer equipment has to be cooled significantly. However, some miners really do play this game, running their equipment at higher temperatures. Many miners in Texas (not the coolest place in the world) do not use cooling equipment and don't mind the rigs’ intake air being just regular ambient temperature, which means a high temperature in that state. Tyler has his mining rigs running in 50 to 70 degrees Fahrenheit air during the winter, and 70 to 90 degrees Fahrenheit in the summer. In fact, ASIC chips are often rated to run at high temperatures. For example, Bitmain recommends that its ASICs run in an ambient air temperature of 15 to 35 degrees Celsius, or 59 to 95 degrees Fahrenheit. (The company also claims in their documentation that the chips themselves can operate at temperatures as high as 127 degrees Celsius, or 271 degrees Fahrenheit. Don’t touch them!) Miners may also avoid high cooling costs by operating in cooler climates and by circulating outside air through and out, bringing the temperature down to the outside ambient temperature. In cold climates, mining equipment may be used to heat rooms in homes or businesses. Mining equipment can even be spread around a home, comfortably heating multiple rooms rather than baking one single room. The drawback is that the gear is often very noisy. Even in a basement, you may be able to hear it upstairs. Some miners, however, have using liquid cooling and a heat exchanger to cool their equipment, which also quietens it. Consider that if you heat your house with your mining equipment, you’re reducing the cost of heating your house. You normally won’t see this in your profitability calculations, though you may want to add your personal-heating savings to the profit to find your true profit. But you would not want to include this number when calculating your taxes. In general, you can most likely count this reduction in personal expenses as a nice little bonus that the Internal Revenue Service doesn’t need to know about. (Talk to your tax advisor!) Some miners have even used immersion cooling for their hardware, using mineral oil or other engineered fluids as a dielectric insulator to protect equipment from electrical faults and to easily dissipate heat. Mineral oil conducts thermal energy well but doesn’t conduct electricity, so electrical mining equipment can be submerged into it and operate fine without failure. Miners then cool this fluid with thermal exchangers to dissipate the excess heat from the dielectric fluid. Whichever strategy you end up using for cooling your mining equipment, reducing cooling costs as much as possible is an effective way to boost ROI. Score hardware deals Mining equipment hardware will be your largest capital investment. Being able to recognize and take advantage of savings on the original acquisition of the mining equipment is a great way to reduce your initial cost and ensure a quick ROI on that investment. So you need to be a good shopper. Search online marketplaces, such as Craigslist, eBay, Amazon, NewEgg, and others to keep an eye out for discounted cryptocurrency mining hardware. Before buying a particular piece of equipment, do a quick search engine query and see whether you can find it cheaper. Have a really good understanding of what different types of equipment can and should cost. Use equations and online tools to find out whether that hardware is indeed profitable before buying, but be careful, as even these calculations can be misleading. Second-hand hardware may not be feasible to run in the long term due to market conditions changing, such as cryptocurrency exchange price, block difficulty, and increased network hash rate. Often deals that appear too good to be true may very well be; they may be great today, but have a short operational life. If you’re on the hunt for the latest and greatest hardware, be prepared to pay a premium for the most efficient and highest hash rate mining devices. Run the numbers, and you’ll sometimes see that you’re better off using less efficient equipment that costs you less. Also, sometimes it is best to buy new pieces of mining gear straight from the manufacturer to avoid unnecessary middleman price markups. Tread lightly with mining hardware acquisition, as it is likely to be the most significant contributor to your initial investment and the choices you make early on in your mining endeavor will greatly affect your ROI going forward.