Cryptocurrency mining is now more popular than ever before. There are 100s of videos on YouTube on how to mine Ethereum or which is the best GPU for mining. Multiple Sites can be found that have a GPU mining calculator in order to calculate GPU mining profitability.
These days many people own crypto mining setups to make some passive income. So much so that this increase in mining has disrupted the GPU market. Mining Ethereum, bitcoin is an excellent source of passive income. Although earning money from cryptocurrency is not as easy as it used to be.
Crypto miners validate the transactions on the blockchain. This validation mines and adds a new block on the blockchain. Whenever a miner mines a block successfully, they earn some rewards in the form of cryptocurrencies. These are native tokens from the blockchain they are mining. Proof of work and proof of stake are the two most popular methods of crypto mining. A BTC miner utilizes proof of work mining, the same as an Ethereum miner.
Challenges of GPU mining in 2023
The number of miners on blockchains is continuously increasing. However, this increases the overall difficulty of mining on that blockchain. Transactions are verified by solving complex cryptographic equations. Certain computing power is needed in order to solve these equations and mine a new block.
As the number of miners increases, these equations become harder and harder to solve. This, in turn, increases the overall difficulty of mining on that blockchain. An Ethereum miner shall now earn much less with the same mining setup than they did a year ago.
Hash rate is the measure of how effective a mining setup is; it is also used for distributing rewards in a mining pool. In order to increase their earnings, miners continuously keep upgrading their hardware.
Since the added difficulty on the blockchain requires more computational power, a GPU miner shall add more GPUs to their rig in this situation to obtain additional power. Its insane demand for GPU is one of the main reasons why the graphic card market has skyrocketed. But even with many GPUs, mining doesn’t get any easier.
Mining Hardware like ASICs now rules the market. These are much more efficient than a GPU for mining. It is also extremely difficult for new people to get their hands on these along with any kind of mining hardware. They are booked on pre-orders and are sold for much more than their original MSRPs on the market.
However, this hardware is now available on sites like Hashuni for surprisingly fair prices. The reason being, they are among the largest high powered computer hardware suppliers in China. Customers and companies can directly purchase the best GPU for mining and high powered computer hardware like ETH Miner, BTC Miner, Arweave Miner, Filecoin Miner, and many other crucial hardware directly from factor to the customers at unmatchable prices.
Types of mining
1: Proof of Stake mining
Proof of stake uses an election process to randomly choose a node. The chosen node then validates a new block. Proof of stake has no miners but instead has “validators .”However, validators aren’t chosen randomly.
Each node deposits a certain amount of its coins as a stake. The size of the stake determines the chance of a validator to be chosen next. If a node is chosen, it will check if all the transactions in the block are valid.
If everything checks out, the node signs off on the block and adds it to the blockchain. As a reward, they receive a fraction of the transaction fee. If they approve a fraudulent block, validators lose a part of their stake.
2: Proof of work mining
Proof of work algorithms makes it possible to mine using computational power. The idea was first proposed in 1993 to combat spam emails. However, largely the technique went unused. That is until Satoshi Nakamoto created bitcoin in 2009.
The mechanism is used to reach a consensus on the network. This was used to secure the bitcoin blockchain. The proof of work mechanism uses the power of the hardware to solve a cryptographic puzzle. A miner solves this puzzle, and the first one to solve the puzzle gets the reward.
Proof of work is used mainly to mine cryptocurrencies as of now. This is why we can see miners building larger and larger mining farms. According to the New York Times, bitcoin mining uses 91 terawatt-hours of electricity. This accounts for 0.5% of electricity consumption worldwide. Newer Hardware like ASICs, however, consumes less energy than traditional GPU mining.
Evolution of hardware in cryptocurrency mining
In the early days of bitcoin, you could mine one bitcoin using a normal desktop at your home. Mega setups containing expensive hardware are now required to do the same task. This is also one of the main reasons for the surge in bitcoin prices since it’s harder to mint now. The evolution of mining hardware started when ASICs were first launched in 2015.
What is an ASIC?
An ASIC is an application-specific integrated circuit. It’s a chip designed with a particular purpose to solve a particular problem. They process data for one application. Unlike a normal processor, ASICs are hardwired to run only the algorithms needed for a specific task.
How is an ASIC different from other hardware?
Their architecture has a blank template of logic gates that are permanently connected according to a design. They are highly specialized pieces of hardware that take a lot of time and money to develop.
Custom ASIC designs such as the ones used to mine cryptocurrency are extremely rare. This is why only a small number of them can be found in the market. You can get mining ASICs from Hushni, but these pieces of hardware tend to sell out pretty quickly.
What makes an ASIC suitable for mining ethereum?
An ASIC is highly efficient at solving a particular problem. This makes them suitable for solving blockchain problems in order to mine cryptocurrencies. There are many blockchain problems, and different blockchains have different kinds of problems with their proof of work mechanisms. Bitcoin uses an SHA-256, and eth mining requires ETHASH.
Each of these problems is a bunch of math. So the hardware does this math until it figures out something and wins a reward. These problems are optimized on complex blockchains, such as BTC and eth, as ASIC is designed to perform a certain hash as efficiently as possible. This makes an ASIC highly suited to mining.
Despite the difficulty level, crypto mining offers promising rewards. However, gone are the days when you could simply buy a GPU, join an Ethereum mining pool or minergate and make money easily. Proper planning and execution are needed to successfully earn in crypto mining. Anticipate the challenges such as buying hardware and doing proper calculations beforehand. This shall make your crypto mining operation profitable. The fast-paced adoption of crypto-currencies means mining is likely to continue being a highly successful business in the future.