There are several ways to mine cryptocurrency. The equipment and process of mining is constantly changing as new devices and consensus algorithms emerge. Typically, miners use specialized computing rigs to solve complex cryptographic equations. Let’s take a look at the most common methods of mining.
CPU mining
Central processing unit (CPU) assisted mining involves using the computer’s CPU to perform hashing in a PoW consensus. In the early days of Bitcoin, the cost of mining and the requirements for participants were quite low, and its complexity could be handled by the CPU of an ordinary computer. As a result, anyone could mine BTC and other cryptocurrencies.
However, as the number of miners increased, the hash rate of the network grew, and with it the complexity of profitable mining. In addition, the advent of specialized hardware with more processing power made CPU mining nearly impossible. Now CPU mining is not a viable option as all miners use specialized equipment.
Mining with a GPU
Graphics processing units (GPUs) are designed to process a wide range of operations simultaneously. While they are typically used for video games or rendering graphics, they can also be used for mining.
GPUs are relatively inexpensive and, unlike ASIC mining hardware, they can perform many different tasks. They can also be used for mining some altcoins, but the efficiency will depend on the algorithm and the complexity of the mining.
ASIC mining
A special purpose integrated circuit (ASIC) is designed for one specific purpose. In the cryptocurrency space, this is the name given to specialized hardware designed for mining. Mining on ASIC devices is highly efficient, but it comes at a considerable cost. Since ASIC equipment is the cutting edge of technology in the mining space, such installations are much more expensive than using CPUs or GPUs.
In addition, due to the constant development of ASICs, previous models quickly become obsolete and need to be replaced on a regular basis. Even without factoring in power costs, the need to buy new ASICs makes mining on them extremely expensive.
Mining pools
As miners compete to get rewarded per block, the likelihood of finding a valid hash is extremely low. Miners with small computing power have very little chance of finding the next block on their own. Mining pools were created to solve this problem.
Mining pools are groups of miners who pool their resources (hashing power) in order to increase the probability of finding a block and get rewarded. If the pool successfully finds a block, the miners in the pool share the reward among themselves according to the amount of work done.
Mining pools are attractive to independent miners because they reduce equipment and electricity costs, but the dominance of these pools in mining increases the risk of an attack on the network by up to 51%.