A Miner’s role in a Proof of Work cryptocurrency involves verifying and adding new transactions to the blockchain. In return for securing the network and verifying transactions, miners are rewarded with transaction fees and/or a block reward. Specialized hardware such as ASIC miners (Application-Specific Integrated Circuit) or computer GPUs compete for the block rewards by solving complex mathematical problems. Here’s a breakdown of how it works:
Transaction Verification: Transactions are grouped together in blocks. Miners verify that these transactions are valid (e.g., ensuring that the sender has enough funds to make the transaction).
Proof of Work: To add a new block to the blockchain, miners must solve a cryptographic puzzle. The process of solving the puzzle typically involves finding a nonce (a random number) that, when combined with the data of the block and passed through a cryptographic hash function (like SHA-256 in Bitcoin), produces a hash that meets certain criteria (usually a specific number of leading zeros). The miner keeps changing the nonce and hashing until the correct hash is found.
Block Addition: Once a miner successfully solves the puzzle, they broadcast the solution to the network. Other miners verify the solution, and if it’s correct, the new block is added to the blockchain.
Reward: The miner who successfully adds the block is rewarded with newly created coins (this is called the block reward) and any transaction fees included in the block. Some miners “pool” their mining power together so that they have a better chance of solving the puzzle.
Security: Mining plays a crucial role in securing the network. The difficulty of solving the cryptographic puzzle ensures that blocks are added at a steady rate. The more miners there are, the more secure the network becomes.
1. Mining Hardware
Most crypto algorithms require specialized hardware known as ASIC (Application-Specific Integrated Circuit) miners. These devices are specifically designed for the purpose of mining cryptocurrencies. Unlike CPUs or GPUs, ASIC miners are much more powerful and efficient and are programed to mine on a single mining algorithm. However, there are some algorithms that are ASIC resistant and can be profitably mined by GPUs.
Some popular ASIC manufacturers include Bitmain, MicroBT, IceRiver, GoldShell, IBeLink, Canaan, Jasminer.
2. Electricity and Power Supply
Mining can consume a lot of electricity, especially with high-powered ASIC miners. Most full sized ASIC miners require 220v and use upwards of 3000 watts. Some home based miners only require 110v and use between 100-1000 watts.
Most miners come with a power supply attached however some do not. Make sure the hardware has a power supply (sometimes called PSU) and the appropriate cables to plug them in.
3. Suitable Place with Ventilation
Mining hardware generates a lot of heat. Proper cooling and ventilation is crucial to prevent overheating and ensure the longevity of your equipment. Most ASIC miners use fans to air cool the hashboards. The fans can be very loud clocking in at 70-80 decibels when running at full speed. Best at home locations for full sized ASICs are typically in garages, sheds, or basements. Make sure the location is close to a 220v outlet, well ventilated, and away from living areas where loud noises might be an issue.
Alternatively, you can have your miners hosted at a mining farm. Mining farms will typically charge a monthly fee that includes electricity, internet, and minor maintenance.
4. Internet (ethernet) Connection
ASIC miners require a stable internet connection to constantly communicate with the blockchain and your mining pool. The connection doesn’t need to be very fast, but it should be reliable to avoid disruptions during mining. Most are connected by ethernet however, some home based miners will connect via WIFI.
5. Wallet
You’ll need a wallet to store your mined coins. There are various types of wallets, including software wallets, hardware wallets (cold wallet), and wallets on exchanges. Always make sure your wallet is secure, and never share your private keys.
6. Mining Pool
Mining on your own (solo mining) is extremely difficult due to the high competition. Most miners join a mining pool, where they combine their computational power with others in the pool to increase the chances of solving a block. In return, the reward is split among pool participants based on their contribution of hash power. Joining a pool can provide a more consistent flow of earnings compared to solo mining. Create an account and input your wallet address for your mining rewards. Once your miner is connected to a pool you can monitor its hashrate and rewards.
Some popular mining pools include F2Pool, Antpool, Poolin, Slushpool, DX Pool.
7. Setup
First power up your miner and make sure it is connected to the internet. Locate your ASIC miner’s IP address and input the address into a web browser to open the dashboard. Input the mining pools stratum, worker name, and password. Once your miner is connected to the mining pool you will start earning rewards.
Profitability and ROI is determined by miner costs, electricity costs, coin price, and mining difficulty. Newer models are typically more energy efficient and have higher hashrates.
Initial investment: ASIC miner costs and other setup expenses.
Electricity costs: How much you’ll be spending on power.
Coin price: The value of crypto can fluctuate significantly, impacting mining profitability.
Mining difficulty: The difficulty of mining can adjust regularly depending how much hashrate is on the network, affecting how quickly you can mine a block.
*You can use mining profitability calculators like those on websites like WhatToMine or AsicMinerValue to estimate your earnings based on your setup and electricity costs.*
A halving (or “halvening”) is an event in certain cryptocurrencies, most famously in Bitcoin, where the reward for mining new blocks is cut in half. This event occurs at regular intervals and is coded into the cryptocurrency’s protocol. The purpose of halvings is to reduce the rate at which new coins are issued into circulation, thus slowing down inflation over time. An emission schedule is a planned distribution or issuance of a cryptocurrency over time. It defines how many new coins are created and distributed as block rewards to miners and it outlines the overall supply limits (if any).
Bitcoin (BTC):
Block Time: 10 minutes
Difficulty Adjustment: Every 2,016 blocks (~14 days). The difficulty is adjusted so that the average time between blocks remains around 10 minutes
Block Reward Halving: Every 210,000 blocks (~4 years).
Block Reward: 3.125 BTC
Max Supply: 21 million BTC
Litecoin (LTC):
Block Time: 2.5 minutes
Difficulty Adjustment: Every 2,016 blocks (~3.5 days), similar to Bitcoin
Block Reward Halving: Every 840,000 blocks (~4 years)
Block Reward: 3.125 LTC
Max Supply: 84 million LTC
Dogecoin (DOGE):
Block Time: 1 minute
Difficulty Adjustment: Every block using a dynamic difficulty adjustment algorithm (DOGE uses a variation of Litecoin’s)
Block Reward: 10,000 DOGE per block.
Max Supply: Initially had no cap, but it is inflationary, with about 5 billion new DOGE mined every year
Bitcoin Cash (BCH):
Block Time: 10 minutes (same as Bitcoin)
Difficulty Adjustment: Every 6 blocks (~1 hour) using the Emergency Difficulty Adjustment (EDA) algorithm, designed to allow the network to adjust more quickly in the event of hash power changes.
Block Reward Halving: Same as Bitcoin, every 210,000 blocks (~4 years).
Block Reward: 3.125 BCH
Max Supply: 21 million BCH
Kaspa (KAS)
Block Time: 1 Second
Difficulty Adjustment: Moving window based algorithm. Window width is 2641 blocks (blue ones + those of red ones that fit inside the window, counting backward from the virtual’s perspective).
Block Reward Halving: The emission schedule is designed to ensure that a significant number of coins are issued early on but with a gradual decrease in the reward over time. However, Kaspa’s emission curve does not follow a strict halving schedule like Bitcoin’s. Instead, it follows a decreasing linear emission model with a fixed number of coins being created every block.
Block Reward: 69.2 KAS (Jan 2025)
Max Supply: 28.7 billion KAS
Zcash (ZEC):
Block Time: 2.5 minutes
Difficulty Adjustment: Similar to Bitcoin, but uses a different algorithm for adjustment.
Block Reward Halving: Every 840,000 blocks (~4 years).
Block Reward: 3.13 ZEC
Max Supply: 21 million ZEC
Dash (DASH):
Block Time: 2.5 minutes
Difficulty Adjustment: Every block, using a technique known as the Dark Gravity Wave algorithm. This helps maintain block time consistency.
Block Reward Halving: 7.14% reduction every 210,240 blocks (~1 year)
Block Reward: 1.9 Dash shared with master nodes
Max Supply: 18.9 million DASH
Kadena (KDA)
Block Time: 30 seconds
Difficulty Adjustment: Every 2016 blocks [~2 weeks]
Block Reward Halving: Block rewards are readjusted against a set schedule every six months, with roughly half of the remaining minable coins issued as block rewards every 20 years
Block Reward: 0.96 KDA (Jan 2025)
Max Supply: 1 billion KDA
Alephium (ALPH)-Proof of Less Work (PoLW)
Block Time: 16 seconds or 1 second per chain (16 chains)
Block Reward Halving: No halving, block rewards are adjusted upon hash rate and the timestamp. The mining rewards adjust dynamically with each other. *Block Reward = Min (Hashrate and Timestamp Based reward)*
Block Reward: 0.5 ALPH (Jan 2025)
Max Supply: 1 Billion ALPH