Part 1: Mining Basics
What you need to know, a primer on starting your path to being a crypto mogul.
Note – Do not treat this article as any form of legal or financial advice. It is written with a US centric perspective, and exchanges in particular have many geographical boundaries and laws that vary in the US from State to State. Mining is a taxable event in the US and some countries throughout the world, so you will want to consult a tax professional and/or read up on this topic at IRS.gov and understand the implications that mining may have on your finances
Cryptocurrency coin mining has been around for over 10 years, with Bitcoin being the most recognizable. The basic principle is that a user runs software, called a miner, which performs mathematical calculations in order to try and “solve” a block. When a miner solves the block, they claim the rewards, which are the coins. The coins are minted onto the blockchain and broadcast to “nodes” that act as validators and accept the transaction and associate them with the miner(s) address on the blockchain. Sounds simple so far, right?
Types of mining
Mining can be done on three main types of hardware, the first being CPU mining. Like it sounds, CPU mining involves using your PC’s processor in order to perform the mathematical calculations. Personally, my recommendation would be to forgo CPU mining as it is not super profitable and could have some negative long-term consequences on stressing your PC. The most common CPU mining crypto would be Monero. The second type is ASIC, which is basically a purpose-built machine created solely for the purpose of mining. Bitcoin is mined this way as the speed and complexity of the mathematical equation needed to solve a block is ill suited to CPU and GPU mining. ASICs are generally quite expensive and have a limited lifetime before the complexity of the coin increases and slows them down the point of consuming more electricity than they generate in coin revenue. The last and currently the most popular form for home miners would be GPU mining. Ethereum is currently the most popular coin being mined by GPU miners, and can be profitable. GPU mining involves putting your graphics card to work, and can be done simply and effectively with just a few steps.
How can I get started?
The easiest answer would be an all-in-one solution that streamlines and unifies all the components needed for mining. Those components and steps include setting up a wallet to “hold” the cryptocurrency, obtaining and configuring mining software that harnesses your GPU and optionally CPU (see above for my advice, which would be to NOT CPU mine), and placing your machine in a “pool” with other miners in order to increase the collective rate at which you solve a block.
Option 1: Nicehash
Nicehash.com is the most popular and easiest on-ramp to mining for most users. It does all the above steps, has free transfers to Coinbase, which is a popular cryptocurrency exchange (think NASDAQ or DOW for coins), and has the distinction of paying the user in Bitcoin, even if they are mining another coin such as Ethereum. These two qualities – free transfer to Coinbase and paying in Bitcoin – are done in exchange for a slightly lower rewards rate than otherwise mining coins directly but offer significant ease of entry into the mining world and are a great way for beginners to get started with minimal effort.
(Figure 1 – Nicehash landing page)
*Note – Nicehash has been engaged in some unpopular behavior lately with casting aspersions at other coin mining software – Phoenix Miner – and suggesting users not trust it. I am aware of the imbroglio and recommend you read up on the topic (“nicehash phoenix miner controversy” is a good search string) and draw your own conclusions regarding whether Nicehash is a company that you would support. It would be silly not to mention them as the easiest option in any mining article, irrespective of this latest incident.
Option 2: MPH does NOT just stand for miles per hour.
Slightly more complex would be to create an account on Mining Pool Hub and following their setup guide. It is a bit more daunting in terms of getting everything downloaded, setup and running, but it also allows payout in Bitcoin even if you are mining Ethereum, which is the most logical coin to mine at the time of this article. You will however need to get a wallet and supply an address in order to get paid, vs Nicehash which will give you a payout address.
(Figure 2 – Mining Pool Hub landing page)
What else do I need to do?
Nothing! You’ve got Nicehash up and running, Bitcoin is starting to trickle into your wallet, you’ve now officially a miner. Eventually you will want to move your money out of Nicehash and into either an exchange (remember Coinbase above?) or a wallet that you control. It is a good practice to periodically move some of your money off the exchange, to a place that is under your control. Be mindful of transaction and transfer fees imposed by the exchange. I personally like Exodus for a software wallet, and Trezor if you are interested in complementing it with a hardware-based solution for securing your coins.
Stay tuned for Part: 2 where we will go more in depth on GPU configurations, RTX overclocking, and using third party mining apps to cover different Ethereum mining pools.
This article was written by “Cornfather” on the ATR Stonks Discord, and does not represent the views of NerdSpeak.net, or NerdSpeak LLC, and should only be used for informational guidelines. Please consult your tax CPA before engaging in any transaction.
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