Mining is the process by which transactions are added to and confirmed on the blockchain; it also adds fresh coins to the supply as compensation for running the energy-intensive mining hardware.
People mine cryptocurrencies with graphics cards or special ASIC (application-specific integrated circuit) units; however, some coins can only be mined with a PC processor. Miners can mine most coins solo or in a pool. A pool is a team of miners working together to solve a block; the reward is then distributed to the miners based on the number of shares each miner contributed. There are also several pools that offer cloud mining, or “shares” of mining power that can be purchased to invest in mining without having to run any hardware.
So who are the “miners” that run the powerful ASIC units and have money invested into cloud mining services to keep the blockchain running and secure? Well, it’s a bit of a difficult question, since anyone can mine anonymously. I believe it’s safe to say that most miners are relatively similar to you and me. Most of them apparently have at least some of knowledge related to computer usage; many probably have a genuine enthusiasm for the blockchain technology and want to support it. Surely, the profit from mining is a very inspiring thing on its own, but the electricity costs make it very difficult to earn large sums of money. Therefore, I would find it hard to believe that the majority of people, those outside of the community, are mining purely for gains. I’m quite sure most current miners started sometime last year, after the first Silk Road bust and the huge price bubble. Likely, there are still quite a few miners that have been mining since 2010 or even earlier (Read more at “The History of Bitcoin Mining”).
I’ve recently read a hypothesis that cryptocurrency ASIC miners will probably soon be inexpensive and efficient enough for the average person to own at least a small amount of hashing power. If it’s true, this would be a good thing as it would maximize Bitcoin’s decentralized factor and make the fear of 51% attacks a matter of the past. The future of mining looks good, since it depends on two things with which we already have had good luck. Firstly, the companies that constructed ASIC units will need to continue building more efficient machines at more reasonable costs. Secondly, the value of cryptocurrency will need to continue to rise, like transaction volume does, in order to provide better compensations to more and more miners. It will solve an existing problem with the difficulty increases and the block reward halving which will take place within the next few years.
So, now that you have a brief introduction to the mining process and a quick look at the types of people that are already mining, you might be thinking, “How do I get started?” Well, fortunately, cryptocurrency mining has gotten quite a bit more user-friendly over the last year. If you’re interested in mining Bitcoin, then I suggest you take a look at bitmaintech.com, and if you’d rather mine Scrypt algorithm-based coins, then you should check out zeusminer.com. Of course, if you don’t want to run the hardware yourself, then you could always buy some Bitcoins here on CEX.IO.
And what is your favourite way of mining?