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Cryptocurrency mining: how does it work

Cryptocurrency mining how does it work


Recently, cryptocurrency mining is a popular means of earning, which both companies and ordinary people who own special equipment are engaged in. If we talk about cryptocurrency mining at home, then this is not the best solution, since it brings a lot of problems to miners. Due to the constant overload of the electrical network, turning off traffic jams and noise that creates equipment, cryptocurrency miners are evicted from apartments and driven out of offices. Who solved their problems? And what payment did you receive for this?

The rapid increase in cryptocurrency prices over the past year has led to the development of mining at home. It all started with the fact that all the components for mining farms: power supplies, video cards and motherboards disappeared from the store shelves. The rapid and large-scale increase in the number of miners led to problems associated with electrical wiring that could not withstand the load, computers that overheated without constant ventilation and stopped working, and a critical increase in electricity consumption. In connection with the problems encountered, crypto-farms began to look for new ways to create an alternative currency, and found them in mining hotels with secure sites and paid "beds" for the farm. Let's see how their business works.

How it works

Mining (from the English mining, mining) is the creation of cryptocurrency by solving mathematical problems. The miner rents his computer with components for cryptocurrency mining, which connects to the blockchain network (a decentralized database that owns information about all transactions) and supports its operability.

A mining farm (or rig) is a powerful computer consisting of a motherboard, several video cards (most often from four to eight), and a power supply. Offers to sell crypto farms on the Internet start at $ 1,400. Home and office computers are not used for mining cryptocurrencies, since they have only one video card.

To date, solo mining is not popular, because the chances of success are very small. Therefore, miners are increasingly united in the so-called pools - teams that connect to the blockchain network, and together solve mathematical problems. With a successful solution to the problem, cryptocurrency is created and all team members receive a cash reward in the proportions equal to their productivity. Participants receive this reward to the previously created crypto wallet. When converting cryptocurrency into real money, miners use special cryptocurrency exchangers (HotExchange, Payforia, etc.).

According to 2017, the most expensive cryptocurrency is Bitcoin, which has been produced since 2009. The first person to create it was Satoshi Nakamoto. Analyzing the data of the World Bank for 2009, it can be seen that 1.3 thousand bitcoins could be bought for $ 1, and in 2017 the price reached $ 14000 for 1 bitcoin. Bitcoin mining is not endless, its creator imposed a certain restriction on its production, so the number of bitcoins cannot exceed 21 million. Because of this, you need to have technology with great computing power to mine bitcoin. It is not profitable to mine bitcoin on ordinary crypto farms, because for this you need ready-made equipment that works according to the ASIC integrated circuit. The cost of such equipment is from $ 3,000.

Most often, mining farms are working on the creation of the so-called altcoins, that is, all cryptocurrencies except Bitcoin, the most popular of which are Ethereum and ZCash. “If you think that building a powerful computer for generating currency is all that is required of you, then you are deeply mistaken. Crypto farms need daily monitoring, and your income completely depends on the exchange rate of the generated currency. To date, I have invested almost $ 26,000 in cryptocurrency mining, according to my calculations, this money should pay off within two years from the moment of investment, in accordance with the average monthly exchange rate. Each month 10 farms brings me an average of $ 1,500-2,000. net income, ”the cryptocurrency miner told our publisher.

Cryptocurrency mining, for example in Russia, is not legalized, although not prohibited. According to Maximilian Grishin, a lawyer in the Moscow office of the international law firm Ilyashev & Partners, there is no legislation that would regulate the cryptocurrency market. The only document that concerns cryptocurrency is the letter of the Federal Tax Service dated October 3, 2016, which equates cryptocurrency transactions with currency. “If the owner of the premises will settle accounts with tenants with cryptocurrency, then the hotels will have certain risks. If settlements are carried out in conventional currency, there will be nothing to complain about - since the activities of hotel miners are almost no different from the business of ordinary hotel miners, ”says Olga Sorokina, managing partner of O2 Consulting.

Anatoly Knyazev, the founder of the Bitcoin Fund hedge fund, believes that small mining hotels do not have a future, as more and more large mining companies appear on the market, which supplant them. One of the first such companies is the Radius Group - the Internet ombudsman Dmitry Marinichev, who is going to place mining equipment on the territory of the former Moskvich plant.

Igor Shuvalov, whom Vladimir Putin appointed responsible for the development of cryptocurrency technologies, plans to bring cryptocurrency production to the level of a state corporation. Based on the words of Shuvalov, the government discussed the development of this sector in Russia, as it is developing rapidly around the world. They also discussed the installation of electric power generators, around which mining centers could be placed. But while there are no specific projects in this industry.

A counterbalance to mining hotels already exists - this is the so-called cloud mining, that is, the general use of computing power. Companies that provide these services buy a certain amount of equipment and rent out part of their facilities to their customers. As a fee for their services, the landlord receives part of the client’s income minus electricity, Internet fees and the organizer's commission. However, most cryptocurrency market participants do not share such projects. “Just think: why rent equipment to generate money, which can bring high and less stable income to the owners of the cloud?” - asks Alexey Ivanov from Sberbit. Based on the opinion of the head of the mining hotel Adam Guchigov, such a scheme brings less profit than independent currency generation and does not provide an opportunity to control how honestly the owners share income with the lessors.


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