Crypto Miner

Miners are people who obtain cryptocurrency by executing computer algorithms. Cryptocurrency is a medium of exchange that uses cryptographic principles to ensure transaction security and control the creation of transaction units. A miner's job is to verify and record cryptocurrency transactions and add them to a decentralized ledger called a blockchain. Miners usually consume a lot of electricity and hardware to mine, so they are rewarded with a certain amount of cryptocurrency. Different cryptocurrencies have different mining mechanisms and difficulties, such as Bitcoin, Ethereum, Litecoin, etc.

How to Calculate Profits

Cryptocurrency miners’ profits are determined by several factors:

• Block reward: Block reward means that every time a miner successfully verifies a block, they will receive a certain amount of cryptocurrency as a reward. Different cryptocurrencies have different block rewards. For example, Bitcoin’s current block reward is 6.25 Bitcoins.

• Transaction fee: Transaction fee refers to the fee that needs to be paid to miners when each transaction is recorded on the blockchain. The level of transaction fees depends on the size of the transaction, network congestion and the user's willingness to pay.

• Mining pool allocation: Mining pool allocation refers to how block rewards and transaction fees are distributed to participants after miners join the mining pool. Different mining pools have different allocation models, such as PPS, PPLNS, FPPS, etc. The choice of distribution model will affect the income stability and risk of miners.

• Mining cost: Mining cost refers to the funds that miners need to invest, including hardware equipment, electricity, network, maintenance, etc. The cost of mining depends on the size, location, energy source and efficiency of the miner.

Mining Methods

Bitcoin

Bitcoin uses a Proof of Work (PoW) consensus mechanism that requires miners to solve a mathematical puzzle to gain the right to create new blocks. This puzzle is based on the SHA-256 algorithm and requires a lot of computing power and electricity. Therefore, Bitcoin mining requires the use of specially designed hardware equipment, called ASIC (Application-Specific Integrated Circuit) mining machines. These miners can efficiently execute the SHA-256 algorithm, but cannot be used for other purposes. Bitcoin mining also requires the use of corresponding software, such as CGMiner, BFGMiner, etc., and joining a mining pool to increase profitability and reduce risks.

Ethereum

Ethereum currently uses a proof-of-work consensus mechanism, but plans to switch to a proof-of-stake (PoS) consensus mechanism by the end of 2022. Proof of Stake does not require miners to solve mathematical puzzles, but instead selects validators who create new blocks based on the amount of ether they hold. This means that Ethereum mining will end in the future and will be replaced by staking. Lending does not require the use of special hardware equipment, you only need to save an Ethereum wallet online and hold at least 32 Ethereum coins.

Currently, Ethereum can still be mined using proof-of-work, but its difficulty and competitiveness are increasing. Ethereum uses the Ethash algorithm, which requires a lot of memory space and bandwidth, so it is not suitable for ASIC mining machines. Ethereum mining usually uses GPU (Graphics Processing Unit, graphics processor) or FPGA (Field-Programmable Gate Array, field programmable gate array) mining machines. These mining machines can execute a variety of algorithms and can also be used for other purposes, such as gaming or video processing. Ethereum mining also requires the use of corresponding software, such as Ethminer, Claymore, etc., and joining a mining pool.

Cardano

Cardano uses a proof-of-stake consensus mechanism that does not require miners to solve mathematical puzzles. Instead, validators who create new blocks are selected based on the number of Cardano coins they hold. This means that Cardano cannot be mined, but loaned out. Lending does not require the use of special hardware equipment. You only need to save an ADA coin wallet online and hold at least 1 ADA coin.

There are two ways to lend ADA coins: create a verification pool yourself, or join an existing verification pool. Creating a verification pool requires paying a fee and maintaining a certain network connection and computing power. There is no fee to join a verification pool, but a portion of the revenue must be shared with the operators of the verification pool.

Dogecoin

Dogecoin uses a proof-of-work consensus mechanism that requires miners to solve a mathematical puzzle to gain the right to create new blocks. This puzzle is based on the Scrypt algorithm, which requires a lot of memory space and bandwidth, so it is not suitable for ASIC mining machines. Dogecoin mining usually uses GPU or CPU (Central Processing Unit, central processing unit) mining machines. These mining machines can perform a variety of algorithms and can also be used for other purposes, such as gaming or word processing. Dogecoin mining also requires the use of corresponding software, such as EasyMiner, MinerGate, etc., and joining a mining pool.

Risks of Miners

Environmental Risks

Cryptocurrency mining requires large amounts of electricity, which could have an impact on the global environment, especially if it is powered by carbon-intensive energy sources such as burning coal.

Legal Risk

Cryptocurrency mining may be illegal or restricted in some countries or regions, such as China, India, Iran, etc. Miners risk being raided, equipment confiscated, fined or criminally prosecuted.

Economic Risk

The benefits of cryptocurrency mining depend on factors such as market price, difficulty, competition, and cost, which may change, resulting in a decrease in the miner's return on investment or a loss.

How to Choose Mining Pool

Cost

The fee percentage is the fee that the pool owner takes from your total earnings and can range from 0% to 10%. Generally speaking, the lower the fees, the higher the benefits.

Geographical Location

Joining a mining pool closer to you will result in a better mining experience and higher income due to fast connection speeds and low latency.

Reputation

Join a mining pool with a good reputation and credibility to avoid being cheated or adversely affected. Some mining pools will intentionally change Bitcoin mining modes or refuse to switch to the latest version 

Allocation Mode

The distribution model refers to how the mining pool distributes block rewards to participants. Common distribution modes include PPS, PPLNS, FPPS, etc. Different allocation models have different advantages and disadvantages, and you need to choose according to your own mining goals and risk preferences.