30 August 2021
We've probably all heard of virtual money, which may or may not be backed by physical currencies. What exactly is it all about, and can you really become a billionaire by building a digger farm? Although it sounds scary, all you need to build your first digger and join this mysterious group of diggers is a little understanding of the subject and a strong computer.
What are cryptocurrencies?
A cryptocurrency or virtual coin is a distributed system connected by nodes, commonly called a wallet. It stores information about the contractual units held, which can only be accessed by a someone who knows the private key. It is not possible to reissue the same unit by the same person.
Anyone, anywhere in the world and at any time can create their own cryptocurrency. Most of the virtual coin's source code is based on free software, which the creators slightly alter for their own purposes, reworking the parameters of their currency. That is, in a nutshell, a unit code is created and its value depends on the strength and stability of the digging computer.
The most popular cryptocurrencies include: Bitcoin, Ethereum, Ripple, or the very memeable Dogecoin, for whose popularity and ups and downs on the stock exchange Elon Musk is responsible.
Cryptocurrencies attract public attention not only because of the theoretically simple way of "mining" them, but mostly because of the unpredictable environment that gathers around virtual coins. So, it is a kind of gambling, just like playing in the real stock exchange.
What are cryptocurrency miners?
In the days of our great-grandparents, digging meant that a miner would go down into a mine and, banging on the wall with a pickaxe, extract a more or less precious mineral from it. This is exactly how cryptocurrency mining works, only instead of muscle power, miners use the power of their computer.
To mine a virtual currency is to produce a new currency which, once it hits the market, in each transaction must be confirmed with the miner who dug it. Blockchains are used for this — they can be considered a type of ledger.
At the beginning of the development of the cryptocurrency market, the most popular way of producing cryptocurrencies was using the digital resources of the processor. However, this is a slow process and involves little return compared to the work the equipment has done. In addition, mining computers need to be cooled intensively, which increases electricity costs.
If, on the other hand, a miner values digging speed or efficiency the most, he will rather use ASIC machines - specific integrated circuits. Designed for specific cryptocurrencies, they will only be used to produce new units. However, due to the accumulation of power in a single digital location, this way of digging may negate a fundamental element of cryptocurrencies — decentralization.
The most famous method of digging is definitely on graphics cards, which owe their dizzying recent prices to mining. Using multiple graphics cards increases mining efficiency. Typically, miners using this solution rely on open cases that allow for easy insertion of more components into the computer. However, due to rising GPU prices, the start of the investment can be much higher than mining on CPU.
An expensive game of Wolf of Wall Street
The most important problem arising from entering the world of cryptocurrency mining is the cost of electricity. Such farms use huge amounts of power, mainly due to the extensive cooling systems that protect the equipment. Apart from this, you need digging software which needs to be configured accordingly depending on the requirements of the virtual coin.
However, in order for these investments to pay off in tangible currencies used in the physical world, when choosing the miner's path, the type of units to be mined must be chosen accordingly.
An important criterion is the price of the asset — and due to the large fluctuations in the stock market, it is advisable to choose such a coin, the mining of which is less than the current market price. However, this does not change the fact that mining is associated with the risk of losing money. Once mined, the currency can also be stored in anticipation of better days — after all, it only takes a tweet for the shares to fly up by billions.
Not in all countries is it legal to own and mine cryptocurrencies. Additionally, not in every country will the price of electricity support the development of this segment of the digital market.
Miner's hardware requirements
In order to build your own small mine, which will not endanger a city, you need a motherboard, a ram, a processor and a power supply. In addition, you need a GPU and a very efficient cooling system. All this should be placed on a special frame or in a case.
It is important to use high quality equipment — the power supply should be durable enough, because the mining machine work 24/7, and a failure can be devastating to the resources of our wallet. The fan-based cooling system and mining rigs should be selected so, that the cooling of components is as effective as possible in order to fully utilize the capacity of the miner.