After setting up a wallet, creating an account on an exchange, and purchasing your first cryptocurrency, most new users are interested in learning more about mining: What is it? How do I do it? What are the different types?
Because the topic is often so mystifying for many new adopters in the crypto world, it can be difficult to find clear, user-friendly guides on the topic—so we’ll do just that!
In order to avoid an hour long lecture on the topic, we’ll keep things simple. Blockchain technology requires voluntary users in the network to confirm transactions and add them to the public ledger. If you think about Bitcoins, and other currencies, like precious metals such as gold or silver, you’ll see that Bitcoins are already there, they just haven’t been “found.” Just like gold and silver, miners aren’t “making” Bitcoins; instead, they’re finding them. When miners are running their rigs, they’re actually going through an unthinkable number calculations to match the actual hash functions until they find the correct one. Once the correct one is discovered, the block is validated, added to the public leger, and the “miners” have found Bitcoins!
The easiest way to think of a “master node,” is as a computer that is part of the network for a specific cryptocurrency that is always on and always working on the network. Master nodes keep a copy of the entire blockchain and communicate with other nodes in the network to maintain an accurate public ledger. Unlike regular nodes, master nodes (MN) can also have additional responsibilities in the network such as: handling instant transactions, increasing the privacy of transaction, and handling other administrative acts as well. Additionally, you can use it as an investment to see a return for some nice passive income through rewards (a way to incentivize people to acquire a cryptocurrency and run an MN). You will need a minimum amount of a cryptocurrency to run an MN in the network in most cases.
With the rapid advancement of the mining industry, a new player has come to town: the ASIC miner. Short for “application-specific integrated circuit,” ASIC’s are hardware machines designed specifically for mining a particular cryptocurrency. Unlike earlier days of GPU, and even CPU, mining, ASIC’s operate far more efficiently since they are not a general-purpose machine. But does that mean you should only look into ASIC mining? Let’s look at the pros and cons of each.
ASIC mining offers significantly higher hash rates than GPU mining, and are great for scalability and increasing your mining production, but are also terribly loud, hot, and they limit you to one mining algorithm, which you may want to change in the future.
With GPU mining (more traditional rigs utilizing multiple graphics processing units), is not as lean or efficient as ASIC mining, the most important advantage is that it can be used a variety of cryptocurrencies (especially since some cryptocurrencies are considered “ASIC-resistant”). These machines, while not exactly quiet, are significantly less noisy than ASIC’s. GPU mining is a bet for more long term mining, rather than short-term gains of ASIC mining.
The last thing to consider when getting started with mining is what your return on investment, or ROI, is likely to look like. Miners are required to invest a lot of time and money when first starting rig to get everything setup and pay for the hardware, but there are other additional costs like electricity in your area, price of the amount of coins you need to run an MN, etc. that need to be factored for as well. What’s the point in spending so much time and money on an investment that will never bring about any reasonable return in the long run?