Cryptocurrency mining depends on the mining system that uses the blockchain of the digital currency that you need to mine. There are two types, Proof-of-Work system, Proof-of-Stake system. For all these mining systems, equipment, hardware, and commercial mining schemes have been to facilitate the incorporation of new miners into the network.
PROOF-OF-WORK
In the Work Test System (PoW), miners use processors, commercial or specialized, to solve the hash riddles. Depending on the current processing power of the cryptocurrency network, the difficulty in finding the nonce will determine the amount of computing power needed, as well as the type of chip to be used.
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Bitcoin mining, for example, has used computer chip processors (CPU), video cards (GPU), programmable chips (FPGA) and, currently, uses specialized chips (ASIC).
For mining with CPU, GPU, and FPGA, miners must make unique configurations of these chips in their computers that provide them with a competitive computing power concerning the total processing power of the cryptocurrency network they mine.
In addition to this, they need to use software that allows them to interact with the cryptocurrency network in order to obtain the jobs of the blocks to consolidate and send the solutions they obtain.
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Mining with ASICs is much simpler. Specific Application Integrated Circuits (ASICs) are grouped into electronic cards that, in turn, are connected to a control card containing the mining software to give life to a modular miner.
This miner should only be powered by a power source of 600 to 2000 watts and configured its software to start working in the cryptocurrency network.
A large percentage of the cryptocurrencies in the market use the PoW mining system with different encryption algorithms. Bitcoin, for example, uses SHA256; Litecoin, Script; Ethereum, Ethash; Dash, X11; among many others.
PROOF-OF-STAKE
The Participation Test (PoS) is an alternative mining system to the PoW in which an equity value for each currency that corresponds to the number of coins. That the holder will receive when a certain amount of time has elapsed without using said currency.
In this system, the value obtained grows as long as the currency is not in use. If the coin gets any use detection, the stock value restarts.
The first cryptocurrency to use this algorithm is Peercoin, which uses a hybrid between PoW and PoS. Other cryptocurrencies are Qubits, Novacoin, Diamond, Nxt and many others. Also, Ethereum plans to make a change from PoW to PoS by December 2016.
MINING GROUPS (MINING POOLS)
The mining groups (mining pools) are away miners pool their resources and share their computing power while reward divided equally.So, depending on the amount of work which contributed to obtaining a block.
Bitcoin mining in groups began when the mining difficulty increased to the point where it could take years for the slowest miners to generate a block. The miners’ solution to this problem was to pool their resources. So they could create blocks faster and thus receive a portion of the Bitcoin reward block on a constant basis, rather than at random once every few years.
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The mining group works together to get the same block, using the cryptocurrency address of the group manager as the recipient of the reward. The manager is in charge of publishing the blocks to work. And then distributing the profits per block obtained to the members, based on the amount of work that each one did. That is proportional to the processing power that each member controls.
By doing this work, the group manager keeps a percentage of the profits called the group fee (pool fee). The group fee is usually around 0-4% of the profits.
Slushpool, the first mining group, created, was launched on November 27, 2010. Since then, mining has become a common practice in organizations, almost predominating over drilling alone. Also, it has extended to the mining of many of the best-known cryptocurrencies: Bitcoin, Litecoin, Dash, and Ethereum, among others.
Advantage
They reduce the uncertainty of getting a block and with it, the economic risk; they allow small miners to participate profitably and keep the validation software of the miners updated.
Disadvantages
They encourage the centralization of the network, discourage miners from running complete nodes. And make it more cumbersome (in some cases impossible) to exercise the will of the miners to vote on changes in the network.
MINING IN THE CLOUD (CLOUD system)
The mining cloud (cloud mining) or hashing cloud allows users to buy hardware mining capacity in remote data centers, for an agreed set time. It is a rental or lease of computing capacity that prevents the acquisition of hardware and software for mining, power consumption, and bandwidth, among other requirements to own a mining center.
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The main disadvantages lie in the high probability of fraud due to not being able to verify the existence or operation of the data center. Also, there is a lower profitability due to the cost of the mining service.
Currently, some companies offer cloud mining services for several of the best-known cryptocurrencies: Bitcoin, Litecoin, Dash, and Ethereum, among others.
CEXio, the first cloud mining company, was established in October 2013. Today there are many others, the most famous being Genesis Mining.
Due to the high degree of trust that must exist between who contracts the service and who offers it. Also, this system has been used to carry out multiple scams over the years. So be careful when investing in mining in Cloud.