If you do not know much about crypto mining, it is important to first have an idea why you would like to mine. The purpose of minen is of course to earn money by creating (minen) new cryptocurrency. You can earn by:
- selling the newly created cryptocurrency.
- earn from the transaction costs.
- collecting rewards (also called rewards) while mining.
In this article we explain to you briefly and simply:
- What is cryptocurrency?
- What is blockchain?
- What is cryptomining?
What is cryptocurrency?
Cryptocurrency is value in the form of an amount in a crypto currency. The latter is a kind of digital currency, which is often used as an alternative money system for regular money types. The world’s best-known crypto currency is Bitcoin. There are now more than seven hundred types of crypto coins in circulation.
In the Netherlands, the value of cryptocurrency must be stated by the Tax Authorities in Box 3. Given the often large fluctuations in the value, the reference date of 1 January is extra relevant. Depending on the jurisdiction, it sometimes makes a difference whether crypto currencies are classified as currencies, such as in Japan, or as other assets, such as in the Netherlands and Australia.
What is blockchain?
For the explanation of the blockchain we limit ourselves to the part that is relevant for mining. There is much more to be said about blockchain technology.
A blockchain is actually a large distributed database. It is open to everyone and nobody is the owner. Just like the internet, with all websites: anyone with an internet connection can view those pages.
When using these databases, a kind of secret code is used, the ‘hash code’. That code is linked to a specific purchase or transaction. The question is often: is a blockchain safe? The answer is yes, a decentralized blockchain is safe, because every participant can see everything and in this way they collectively guarantee safety.
The benefits of payments, transactions and transactions via a blockchain:
- Fast, because it’s real time.
- Cheap, because no intermediary is needed anymore.
- Reliable, because the transactions are visible on all computers that are connected to that blockchain. This makes cheating almost impossible.
What is crypto mining?
Simply put, Crypto mining is solving complex calculation formulas to create cryptocurrency through hardware or software.
At minen, everything is recorded on the block chain (also known as the blockchain). Everything is collected in a ‘block’, which then forms a chain of blocks one after the other. You have to remember that something can only be added to the back of the block. Transactions from the past always remain part of the blockchain and cannot be changed.
Incidentally, not only the transactions are stored, but also a reference to the previous block (the hash): a difficult puzzle to crack.
The checking of transactions is usually done with the so-called Proof-of-Work protocol (PoW), a hashing algorithm. Or the complicated puzzle that must be solved by the miners. Thanks to PoW there is agreement on all transactions in accounting (Ledger). The computing power that the computer has provided for solving the mathematical riddle and updating and checking the accounting records is proof of the work. Proof of Work. Thanks to this protocol, for example, you do not need an accountant or auditor.
With minen you thus contribute to the security of cryptocurrency. However, that is not the only advantage of cryptomining. You can also receive a reward for the use of your miner’s computing power. The biggest gain, however, can be found in the discovery of a new block in the block chain (blockchain). With Bitcoin there is now a lot of competition and therefore a lot of computing power is needed to earn a little bit. This costs your miner a lot of electricity. With other, smaller or new crypto coins (ALTcoins) it can be easier. The value of this currency can always rise, so that you can still achieve a nice return in the long run.
What do you need to mine?
How can you mine yourself? For this you need the following things to get started with minen:
- A wallet of the specific coin that you want to mine
- A good miner that is specially built to mine. The times when your own home-garden-and-kitchen computer was good enough are over.
- A good and especially reliable internet connection and power supply.
- A good location. The miners can become very hot and also make a lot of noise. So it is not convenient to do the minen in your living room. The best location is a basement, attic or shed.
- Because the miner gets hot, you also need a cooling system. Think of fans or air conditioning. It is important that you keep your equipment cool.
- It is wise to be a member of an online mining pool. This is a pool that minethe same cryptomint as you By joining this, you ensure that your income is more stable.
- If you want to sell the crypto coins, you must be a member of an online exchange where you can sell your mined coins.
- And the most important reason: you must like it and be curious how it all works. It is clear that the difficulty level of mines continues to rise. The only way to stay up-to-date is to constantly read in on how you can improve your miners. You can see it as a sport: the person who dedicates himself the most, ultimately achieves the best result.