How to mine cryptocurrency?

Mining cryptocurrency is a complex computational process that verifies the authenticity of ongoing transactions.

Miners perform it on their computers. The entire mining process is a competition or contest in which the first to solve a complex mathematical problem wins.

Mining is the calculation of hashes using the computing power of a personal computer, through which a new block of transactions is added to the blockchain. This process not only ensures network security but also maintains its decentralization.

The computer that first calculates the hash can update the transaction ledger in the blockchain (i.e., add another block of transactions) and receive the long-awaited reward - newly mined cryptocurrency coins.

In this article, we will thoroughly examine the concept of mining, discussing mining equipment, miners themselves, and their earnings. We will also explore the concept of mobile mining and consider options for mining coins on iPhone and Android devices.

What is mining?

The word "mining" means "extraction." Indeed, miners extract new cryptocurrency, which they then sell to make a profit.

This is done through certain mathematical calculations, but necessarily with the help of powerful computers.

The blockchain is a sequence of blocks. It is a gigantic database containing some information simultaneously on several technical devices. In the case of popular cryptocurrencies (like Bitcoin), this information is stored on millions of computers at once.

A digital coin is stored in so-called blockchains, which are arranged in a sequential structure. It is a distributed database system that cannot be accessed without a unique key - a hash. Only the cryptocurrency owner has this key, and losing it results in losing access to the database. The hash is unique, eliminating the possibility of overlapping virtual coins on the network and blocking the path for fraudsters.

An individual block represents the final solution of the computations performed on the miners' computers. After the work is completed, the miner can receive their reward, which is redirected to their personal cryptocurrency wallet. However, mined coins can only be transferred after the chosen hash is confirmed by other participants.

Thus, mining verifies ongoing transactions, introduces new digital coins into circulation, and detects any attempts to counterfeit cryptocurrency transfers. The mining process allows the network to maintain its decentralized structure.

Even though the entire mining process on the network is not controlled by government bodies, states have no power over the entire blockchain system, and no existing financial organizations can influence it, the system itself is recognized as one of the most reliable.

A miner is not bound by any strict laws and can freely transfer their unique key to any other network participant. By revealing their key, a user provides direct access to a certain amount of cryptocurrency stored on the network. Only voluntary key disclosure can grant another participant access to virtual funds. Without the appropriate password, an attacker simply cannot steal the cryptocurrency as they won't be able to confirm the operation.

Mining safety principles

The mining process has its own safety principles. Special attention is paid to methods for confirming transactions and forming new blocks. The blockchain system must protect itself from service abuse, such as DoS attacks or spam. Network participants may face significant barriers to accessing the server, making any abuse of mass requests simply unprofitable.

Virtual coin mining is accompanied by several consensus algorithms that organize the security of the entire process against such service abuses. The two most common ones are proof-of-work and proof-of-stake.

Proof-of-work (POW) is used in most of the most popular cryptocurrencies, especially in the Bitcoin network. With this algorithm, the main condition for confirming an action is some completed work. The higher the hashing power (i.e., the hash rate), the higher the reward for the miner will be.

The use of this algorithm has led to the creation of equipment that specializes exclusively in obtaining virtual coins of various cryptocurrencies. This equipment is called an Application-Specific Integrated Circuit, or simply ASIC.

ASICs are not just equipment but real computer chips created by developers specifically to solve complex computational tasks for mining a particular cryptocurrency.

ASICs differ from general-purpose computer processors in that they are designed with a specific task in mind and are optimized for its implementation. ASICs are unique because they can mine digital coins much faster and more efficiently than regular computer processors.

However, ASICs have one major drawback – they cannot perform multiple tasks simultaneously and can only mine one cryptocurrency. This means that to mine another cryptocurrency, the miner has to purchase another ASIC (which is obviously not cost-effective) designed for mining the other coin. In this regard, general-purpose computer processors have an advantage over ASIC devices.

The first company to produce such equipment was Bitmain, which was founded in 2013. Since then, it has been producing ASICs. To date, there are many mining devices from Bitmain.

Another consensus algorithm is proof-of-stake (POS). Here, all chances of mining a cryptocurrency depend solely on the number of coins the miner owns. This means that if you have more coins of a particular cryptocurrency, you will have significantly more chances to mine it.

This method is not as popular as POW because it risks reducing the level of network decentralization. However, its undeniable advantage is that it can significantly reduce energy costs.

There is a high probability that many cryptocurrencies will eventually switch to this algorithm. For example, the Ethereum network has already made this transition.

Mining options

Currently, miners use the following two methods:

Classic mining requires the network participant to have special equipment, such as a personal computer with the latest upgraded graphics card with at least 4 GB of GDDR5 memory.

In addition, one can build a farm using multiple graphics cards or purchase an ASIC, which is built based on integrated circuits designed specifically for mining.

With cloud mining, one can mine without special equipment and significant investment. In this method, the miner simply rents the necessary computing power from data centers.

Cloud mining is advantageous because it does not require substantial funds to get started, eliminates annoying noise from the computing equipment, and does not require a dedicated space for the equipment.

However, one must consider the fees charged by cryptocurrency exchanges for cloud mining. Besides, the miner will not be able to control the mining process, which increases the risk of becoming a victim of fraud.

Bitcoin is the most sought-after virtual coin for mining. At the peak of its development, bitcoin mining caused a surge in demand for graphics cards, thus making BTC mining a costly endeavor.

Before starting to mine the flagship of the cryptocurrency market, one needs to install special equipment and acquire the necessary tools. As mentioned above, mining often uses ASIC devices capable of processing a significant number of hashes per second. In addition to the equipment, miners use special software that can be easily downloaded from the Internet for free.

Bitcoin miners have two options: mine independently or join a mining pool.

In a pool, miners combine their efforts to jointly mine blocks and receive rewards based on the performance of their computing devices.

Participation in a pool is attractive because it offers the opportunity to earn bitcoins even by receiving only a portion of the reward for the block found, which is beneficial to individual miners.

For each transaction in the Bitcoin network, the software generates a special cryptographic hash that combines all the transactions into a single block. This block is then integrated into the BTC network and prepared for the next stage, which is mining.

Within the network, cryptocurrency miners genuinely compete with each other, vying for the right to be the first to decode this hash. The first to decode it receives the coveted reward.

The difficulty of mining, such as that of Bitcoin, is determined by how challenging it is to find that hash. The hash rate indicates the number of hashes per second that the miner's device needs to compute. Currently, the difficulty of BTC mining is maintained at a level that ensures a block is mined approximately every 10 minutes.

Mining profitability

The main questions that beginners and inexperienced miners often ask are: how to make money mining cryptocurrency and how quickly the invested funds will pay off.

So, a miner's income depends on several factors:

• Mining difficulty: The more complex the process, the more powerful and expensive the specialized equipment will be (whether it is purchased, rented, or assembled).
• Cryptocurrency value: For example, the price of Bitcoin in 2021 was $60,000, and Ethereum was $4,000.
• Equipment cost: The price increases simultaneously with the rise in cryptocurrency rates.

The use of sufficiently powerful graphics cards for mining has led to an increase in the cost of these components. Prices for many models have doubled, and some have increased even more.

Despite this, the average payback period for costs remains around 1 year. Depending on the specific cryptocurrency and the cost of the equipment, this figure may be lower (6-8 months) or higher (sometimes it can reach from 1.5 to 3 years).

As of February 2024, miners received 6.25 bitcoins for each block mined that was eventually added to the blockchain.

Since Bitcoin's launch in 2009, the reward for each block mined has gradually decreased. Initially, the rule was that the miner received 50 Bitcoins for each block. After four years, the miner was entitled to 25 Bitcoins instead of 50. Another four years later, the miner received 12.5 Bitcoins for a block. In 2020, a BTC miner counted to receive only 6.25 Bitcoins for each block added to the network.

The process that reduces the reward for mining BTC by half is called halving. This event occurs every time an additional 210,000 blocks are added to the blockchain. As explained earlier, Bitcoin's network undergoes a halving approximately every four years. This year, another halving took place in April, after which the reward for miners was reduced to 3.125 Bitcoins for each block mined and added.

The more miners on the network, the harder it is to find blocks. However, this principle of network operation is extremely important as it helps maintain stability, ensures a constant flow of new bitcoins into the system, and curbs inflation of the currency rate.

Besides all the above, a miner's income also depends on the following circumstances:

• Network hash rate
• Block reward size
• Electricity costs
• Mining pool fees
• Bitcoin market rate

How to mine cryptocurrency on a smartphone

Now let's talk about how to mine cryptocurrency using a mobile phone and how profitable it is.

Mining virtual coins using a regular smartphone is possible, but it is important to make sure that your device has enough power for calculations. If the phone is suitable for mining based on its specifications, you will need to install special software on it.

As interest in digital currencies grows, so does the number of mobile applications designed specifically for mining. Currently, there are more than 200 such programs. However, the problem is that even this number cannot meet the existing demand, as none of them can provide adequate results.

Most of these applications collect user information, offer paid services, or simply display ads. It is also disappointing that some of them turn out to be malicious.

There are relatively functional mining software options out there, but you need to search carefully and check each option thoroughly.

The traditional approach to cryptocurrency mining involves the use of mining farms. However, using just a single device, whether it is an expensive ASIC block or a powerful graphics card, is no longer relevant today.

Miners generally have one goal – to make a good profit. Buying and assembling specialized mining equipment requires a lot of money. The payback period depends almost entirely on the power of the equipment used by the miner. The more equipment or graphics cards are used for mining, the faster you will recoup your costs.

Mining digital coins with a mobile phone is possible, but you should not expect significant profits from this activity. At first glance, a mobile farm has several advantages:

• A mobile phone is always at hand
• It does not require large investments
• Its interface is simple and intuitive
• There is no need to buy blocks, processors, adapters, and various additional devices.

However, all these advantages do not outweigh the following disadvantages:

• The computing power of a smartphone is low, which means that the profitability of such a mining option is insignificant.
• No matter how advanced your mobile device is, its performance will still be lower than that of a PC, so block generation will be very slow.
• The miner will have to spend money on software.
• There is a high risk of installing malicious programs and running into scammers.
• Mobile devices drain quickly.
• Phones tend to heat up quickly due to continuous use.
• Smartphones may freeze and restart frequently, interrupting the already slow generation process.
• A smartphone cannot be used for calls or messaging during mining.
• The mining program causes the mobile device to wear out faster.

An interesting idea is to set up mining farms using multiple mobile devices. On the one hand, this may seem like a good alternative to graphics cards and various computing blocks. Smartphones are much cheaper and more accessible, with intuitive controls. But on the other hand, what good profitability can be expected in this case? Acquiring several smartphones suitable for mining will be difficult to recoup in a short period of time. It would make much more sense to buy a graphics card for mining than to use a mobile phone for this purpose.

However, if a potential miner is not looking to build a successful crypto business, using a mobile phone for mining is quite possible. When the smartphone is not being used for its intended purpose, it can be employed to generate a small but still tangible profit.

The principle of mining on a smartphone is not much different from mining on a personal computer. The main difference lies in the power of the equipment involved in mining. This determines the effectiveness of the entire process. The user’s actions are limited to downloading and installing the necessary application.

In addition to smartphones, there are phones in the market that are specifically designed for cryptocurrency mining. They are produced and released by Taiwan smartphone maker HTC. Initially, these phones were created exclusively as crypto wallets, but over time, software for mining the Monero cryptocurrency was developed.

The profit from such mining on a smartphone is very small – on average $5 to $10 per month. Most of the existing mining apps are more like games, where real money withdrawal may not occur.

By the way, tech giants Google and Apple banned cryptocurrency mining using their mobile devices back in 2018. The reason is that all mining applications overload mobile devices and lead to their failure. Viral programs that often accompany the download of such apps significantly damage the reputation of these companies.

Therefore, standard mining is not available on phones from popular and in-demand developers, but there is an option to perform cloud mining. For Android and iPhone operating systems, you can search for apps on the PlayMarket and AppStore.

Cloud mining is good because it is implemented on rented capacities, meaning that mobile devices are not significantly overloaded.

Mining apps for iOS and Android

How to mine cryptocurrency on devices running Android and iOS? You need to install a special application by choosing a suitable one from the PlayMarket. Please bear in mind that most of them are not only ineffective but also dangerous, as they may be fraudulent.

For example, user applications related to mining through Google's platform are quickly banned. To find a suitable program, users may have to look across other platforms.

As for the iPhone, the AppStore service has very strict requirements for selecting programs. This means that all attempts to download any mining software will be unsuccessful. The iPhone has only one program designed for digital currency mining – Mobile Miner. This application allows you to mine Bitcoin, Ethereum, and Litecoin.

Mobile mining safety

Using mining programs can often pose a threat to both a mobile device and the confidentiality of user data. There are numerous fraudulent schemes that are easy to fall into. Today, no one can guarantee complete security in the field of mobile mining because it simply does not exist.

To assess the level of risk, consider the following points:

• Does the app ask for access to personal data or bank cards?
• Are there real reviews from other users about this app?
• Does the app offer technical support to users?

Before installing any software on your device, it is important to read all available reviews from real users online and carefully study cryptocurrency chats. Although opinions from public sources do not guarantee complete safety, they can help you avoid fraudulent programs.

If a suspicious application has already been installed on the mobile device, it is important to closely monitor the performance of your smartphone. If the device suddenly slows down, freezes frequently, or overheats, this may indicate that it is being used by hackers to mine cryptocurrency. In this case, it is a virus that the user has installed along with an innocent-looking application that controls the device, not the user.

Technically, mining on a smartphone is possible, but economically, it is more of a lottery than a truly profitable activity. The fact is that smartphones are simply not made for mining, as they do not have enough processing power for significant coin mining.

For those who want to make a decent profit from mining and are not interested in wasting time on entertainment or risk, a more reasonable solution would be to invest in good mining equipment and buy a computer with sufficient power for this activity.