Mining for Coins
Prior to reading our articles here, you probably had already heard of cryptocurrency
mining. One of the attractive features of digital currency is that theoretically
anyone with a computer (PC, Mac, etc.) can mine (create) new coins. Early in the
life of a digital coin this is true, mostly. However, most mature cryptocurrencies (such as Bitcoin, Litecoin, Dash, etc.) are not cost effective
for the individual to mine. The resources required to compete effectively
against others are quite extensive. The mathematical problem being
solved during mining (a brute force process) is discovering a correct value,
called a hash. The rate at which this proceeds is called the hash rate. Bitcoin
miners today are measuring their processing capabilities in THash/s (Tera hashes
per second). A typical home computer today can achieve in the tens of MHash/s.
There are six orders of magnitude difference between Mega and Tera. These
specialized computers (called rigs... which borrows yet another term from ore
and petroleum mining) are built specifically for this purpose.
There are hundreds of alternative coins in circulation which can be mined,
along with new ones coming online, and many of these don't need as much
capability as the more established coins. These may be tempting to mine but they will still take both fixed and consumable resources. For
algorithms that use more processing power (SHA-256) you will need a powerful
CPU, a GPU (Graphics Processing Unit), and ASICs would also be helpful. With
the scrypt algorithm, you will need memory, and a lot of it. This will require a
fixed investment. In both cases electricity will be consumed, and a lot of it.
Unless you are in a sunny area with solar panels and no way to sell back your
excess power produced, this will be an expense. Or someone's expense (your
parents' perhaps). All that electricity is being consumed because the computer
is running full power, which means a lot of heat is being produced. The fan in
your computer may not be sufficient; and even if it is it will be running full
time. This is more cost. A hidden cost is the wear on your equipment.
Excessive heat reduces the life of components; when your computer fails will you
factor that in to the cost of acquiring a few hundred Burst coins?
If you want to try mining, don't let all this discourage you too much; just
don't be surprised if it is not profitable. If you are in it to learn, or have
fun, that's great. Have at it. One rationale often offered for such "home
mining" is that if the coins
go up in price, those that have been mined might become a great investment after
all. If profit is all you are interested in, just buy the coins already mined.
It will be cheaper, and you'll get the same profit if the value goes up. And
have less loss if they don't.
Not surprisingly, ponzi type schemes have popped up in the cryptocoin mining
world. One such method is an investment in mining rigs; you are supposed to get
a return on your investment, but you are unlikely to since there are costs to
join and a very small rate of return. Another is pooling, where your
computer can be joined with many others to create a large hash rate; only your
contribution is so small with the major coins that you get nothing (other than a slow running over-heated
computer). How to Geek has a
worthwhile introductory article on mining applications.