Hey, hey! Welcome to Tokenleak’s comprehensive beginner’s guide to the best cryptocurrency to mine. Before we dig any further, I need you know that there’s going to be an awful lot of mining-related puns in this one, I hope you don’t mine-d.
Now you know the drill, you’ll need to learn the basics of cryptocurrency mining before you can decide which one is best for you…
What is Cryptocurrency Mining?
Most cryptocurrencies rely on a process called mining in one way or another. Mining is a vital part of how many cryptocurrencies verify and confirm new transactions. The computers which carry out the process are called miners and are paid for the work they do.
Payment takes one of two forms; either miners are remunerated from fees charged to users making transactions on the network or through the issuance of new units of currency. This second form of payment is called a block reward and is where the process gets its name. It bares a close resemblance to the kind of effort/reward system involved in digging for precious metals like gold or silver, hence mining.
Cryptocurrency mining is actually best described as a sort of blockchain accountancy as much of the work miners do ensures that transactions are checked thoroughly and recorded accurately.
Different cryptocurrencies are mined in different ways, so require different techniques and equipment to get the job done. In the majority of cases, you’ll need a computer, an internet connection and some specialist software. Mining some coins, like Bitcoin, might involve investing in some heavy duty hardware, whereas other coins can be mined using a laptop or a even a mobile phone!
Next, I’ll briefly show you how a typical cryptocurrency is mined. Allow me to introduce you to Ike and Tina…
How Mining Works
As I said, cryptocurrency mining might sound like something you do with a pickaxe and a shovel but it’s really more like accounting. Let’s have a look at crypto mining in action on a single Bitcoin (BTC) transaction.
- Ike owes Tina 5 BTC, so Ike announces that he is sending Tina 5 BTC to the Bitcoin network.
- Using a process called hashing, miners take this information and encrypt it. Then, they add other information from other transactions and hash that as well. Information is added and hashed until there is enough to form a block. Each BTC block is 1 megabyte (mb) of data.
- All the miners now race each other to guess the code or block hash that will be given to the newly completed block before it’s added to the blockchain. Whoever wins gets to add the block to the blockchain.
- Now, all the other nodes on the network check the transaction information in the new block. They scour the whole blockchain to make sure that the new information matches the record (for example if Ike has already spent the 5BTC he is trying to send somewhere else). If it does, then the new block is valid. Now the winning miner can add the new block to the blockchain and claim their reward. This is called confirmation.
Note: The block reward for the Bitcoin network is 12.5 BTC but every network has its own rules for paying miners for the work they do.
- Tina receives 5 BTC from Ike.
A Note on Mining Difficulty
The block hash race, which is essentially a mathematical puzzle that the miners engage in, has variable levels of complexity. This is called mining difficulty. Cryptocurrency networks change the mining difficulty of their protocols to guarantee a steady release of coins in the same way that a central bank regulates how much currency is circulated at any one time.
When few miners are confirming transactions, the puzzle will be easier solve and as more get in involved the difficult will go up. The mining difficulty of different coins will affect which one you choose to mine.
Let’s have a quick look at some of the other technical specs which might influence your decision…
Some Mining Terminology Worth Considering
- Hash rate is the speed with which a miner is able to solve the transaction puzzle.
- Application-specific integrated circuit miners (ASIC miners) are specialist pieces of hardware with one job and one job only, mining cryptocurrency. They are designed to confirm transactions on networks with very high levels of mining difficulty. ASIC miners are expensive, noisy and get very hot!
- Mining pool is the name given groups of miners who join forces to increase their chances of confirming new blocks. They then share out block rewards equally.
- Graphics processing units (GPUs) are generally used to make the graphics in your favourite video games look cool but they can also be used to mine cryptocurrencies.
- Central Processing Units (CPUs) form the central nervous system of all PCs and laptops, their power can also be harnessed to mine cryptocurrency. However, they are nowhere near as good at it as ASIC miners and GPUs.
- Proof-of-work (PoW) is the term used for the process by which many mining protocols operate. The work being referred to is the effort miners have to expend in order to solve the mathematical puzzles involved in confirming new blocks of transactions.
- Proof-of-stake (PoS) mining is an evolutionary step forward for cryptocurrency mining. In this system, new blocks are confirmed by users selected on the basis of their investment or stake in the network not their ability to solve puzzles. This means that blockchains which switch to proof-of-stake mining protocols will do away with PoW mining once and for all.
Now you have a good idea as to how crypto mining works in general let’s look at how some specific cryptocurrencies are mined.
Bitcoin is still the biggest, and arguably best, cryptocurrency on the market. Its mining algorithm, SHA256, is also one of the hardest to crack. Mining BTC is big business with countless millions being made in the decade since its inception. Unfortunately, this doesn’t mean it’s the best coin to mine, especially for novice miners.
Because Bitcoin has been so profitable and popular, mining it is a massively competitive business. So, whilst the rewards are high (12.5 BTC per new block) your chances of earning it are slim, remote even.
In excess of three quarters of the coin’s total supply (21 million) has already been mined, making the task even more daunting for newbies. Furthermore, mining pools consisting of hundreds of high-powered ASIC miners dominate the Bitcoin network making life very difficult for smaller operations.
Unless you’ve got some serious time, money and space to burn, Bitcoin mining may not be for you. However, it can be argued that Bitcoin is the only cryptocurrency which demonstrates the popularity, immutability and censorship resistance needed for a successful decentralized currency. So, whilst the rewards for smaller miners will be negligible, at least you’ll be playing for the winning team!
For those of you who don’t fancy being little fish in the huge pond that is Bitcoin mining, Litecoin mining may provide a satisfactory alternative.
Created by Charlie Lee in 2011, Litecoin is often considered as the friendly younger sibling of Bitcoin. It’s scrypt mining algorithm is designed to favour GPU and CPU miners over heavy-duty ASIC miners which, in theory, makes it a more democratic network.
Litecoin also processes blocks faster than BTC (2.5 minutes per block) and has a higher total supply of coins (84 million) which means that casual users are more likely to earn a block reward (25 LTC).
Litecoin isn’t the only cryptocurrency which tries to encourage less powerful nodes to maintain its network. Let’s look at Ethereum mining next…
Ethereum is a platform with huge long-term promise. There are decentralized applications being built on the network all the time and it’s thought that they may one day rival the likes of Air BnB, Uber or even Facebook. If one of these applications were to prove as successful as their centralized counterparts, the value of Ether (Ethereum’s token) would rocket, making Ethereum a great option for speculative mining.
To mine Ether you’ll need either a powerful CPU or decent GPU with software capable of executing the network’s mining algorithm, Ethash. Ethereum encourages decentralized mining by individuals and discourages ASICs mining.
It’s worth noting that mining Ether using a CPU much less effective than with a GPU card, in fact, GPUs mine around 200 times faster than CPUs. Before buying a graphics card, you should consider the costs associated with the purchase itself as well as the energy consumption. Most importantly, you will need to consider the hash rate performance, which is the speed at which the math problem will be solved.
Ethereum mining can be expensive to set up (graphics cards ain’t cheap!) and consume a lot of energy but the network benefits from a strong community and a near unlimited coin supply. It can be reasoned that Ethereum is a strong choice for miners with an eye on the future of blockchain tech and its application.
And now for something completely different…
Monero is a cryptocurrency in the truest sense of the word. Its protocol focuses heavily on the privacy of its users and it’s often used for nefarious activities for this reason. However, the coin also boasts considerable real-world value and has caught the attention of various nation states including Venezuela, Iran and North Korea (I kid you not!).
Mining Monero can be undertaken profitably using either CPUs or GPUs as it uses a unique algorithm called CryptoNote. Furthermore, it’s relatively easy to establish a Monero mining operation. All you need is GUI version of the Monero software and away you go! Monero is a fine selection for absolute beginners and crypto anarchists alike! Speaking of which did someone say Edward Snowden?
If you want to mine the cryptocurrency that comes with NSA whistleblower Edward Snowden’s seal of approval then you should be mining Zcash.
Zcash is another privacy-centric cryptocurrency which is ASIC resistant. It can also be carried out with inexpensive GPU chips, meaning that novice miners can start earning block rewards without breaking the bank.
An algorithm called Equihash is used to mine Zcash and its development team are so dedicated to decentralized mining that they hope to make it available for smartphones in the near future! The Zcash community hopes that soon users will be able to mine Zcash while their phones are plugged in and unused overnight. Pretty cool, right?
Another coin with a real sense of community spirit is Dogecoin, so let’s dig a little deeper (sorry), shall we?
Dogecoin was launched on December 6th 2013. Based on the Litecoin protocol and thus utilising the scrypt mining algorithm, Dogecoin has become seriously popular due to its altruistic intentions and adorable mascot, a Shiba Inu dog.
Dogecoin is renowned for its charitable uses and prevalence in online tipping. Dogecoin has been used to help send the Jamaican Bobsled Team the Olympics as well as sponsoring Nascars and building wells in Kenya. Users of social platforms – like Reddit – can use Dogecoin to tip or reward each other for posting cool content.
As you can see, Dogecoin has a vibrant (and rather eccentric!) community and one way to support the network is to become a miner.
To do this, you’ll only need a few things. They are;
- A PC with either Windows, OS X or Linux operating system.
- An internet connection
To make your Dogecoin mining journey that bit smoother, I would recommend using a GPU like the Radeon RX 580 with EasyMiner software. Then, you should consider joining a Dogecoin mining pool, like Multipool or AikaPool.
In September 2014, Dogecoin merged mining operations with other scrypt-based cryptocurrencies, primarily Litecoin, making it easier and more inclusive to mine than ever. For a mining experience with a major feelgood factor, Dogecoin and its Shiba Inu loving followers takes some beating.
It’s nearly time to make your big decision about which cryptocurrency is the best to mine for you. Before you do, a quick word on mining profitability calculators. The easiest way to check what kind of financial return you can expect to generate from mining a particular cryptocurrency is with a mining profitability calculator.
There are numerous calculators on offer, but one which comes highly recommended is by CryptoCompare. Simply enter a few details and the mining calculator will indicate which is going to be the most profitable for you at any given moment.
The calculations made to assess the profitability of your mining operation will depend on;
- How much total hashing power your rigs have, ie. your GPU, CPU or ASIC
- How much power your mining rig consumes, in total
- How much electricity costs in the area you operate (in kilowatt-hour (kWh))
- Any additional fees you pay (eg. mining pool fees)
Mining profitability calculators are a must-have resource for budding crypto miners and harden veterans alike.
Now you know what cryptocurrency mining is, how it works, which coins are available for mining and how to calculate they’re profitability, you’re ready to make your final decision.
Before you take the plunge, a few final thoughts…
So, what is the best cryptocurrency to mine?
The short answer is; it depends!
Which cryptocurrency is the best one to mine for you will depend on what you intend to put into the process and what you hope to get out of it. Allow me to explain…
When you think about cryptocurrency, do you think about the price of Bitcoin or the democratic power of the blockchain?
If you mostly think about the price (and it’s okay if you do!), then you’ll probably want to mine a profitable coin, like Bitcoin! However, if you are focussed purely on profit, then you need to get serious and make a considerable investment in the enterprise.
Mining Bitcoin or even Ethereum is no longer for hobbyists, it’s big business and should be treated as such. So, if you’ve got a few thousand dollars burning a hole in your pocket then you might want to consider buying an ASIC miner and joining a mining pool.
If, on the other hand, the thought of blockchain technology and its applications fills your heart with a kind of revolutionary zeal, then perhaps you’d be happier mining a coin with more lofty ideals.
Cryptocurrencies like Litecoin and Dogecoin pride themselves on representing the democratic traditions from which Bitcoin was derived. Inclusion and accessibility are all-important to these networks and they need all the miners they can get to ensure their survival.
Whether you’re mining for profit, for pleasure or for progress you can rest assured that whichever coin you choose to mine, you’ll be making a tangible contribution to the maintenance and development of one of the most exciting technological leaps the world has ever seen!