Cryptocurrency: the money of the future. If you are familiar with Bitcoin, you may already have a grasp of what a cryptocurrency is and what cryptocurrency mining entails. If not, we’re here to give you a quick lesson! Cryptocurrencies are, simply put, a form of digital currency where limited entries are stored in a database that cannot be edited unless specific criteria are met. Think of cryptocurrencies like dollars in a bank: your dollar bill will not rise or fall in face value and the number of dollars in your bank account will not change unless you withdraw or deposit them. Their “hidden” value may change with the rise and fall of markets, but the face value will remain the same (think of foreign exchange rates).
So what is cryptocurrency mining? Think of it the same way you think of earning and saving money. You are “mining” the cryptocurrency supplies to add individual forms of cryptocurrency to your wallet (or digital wallet, as it may be). The most common form of cryptocurrency mining and the form addressed in this article is the mining of ‘scrypt’ coins. By providing bookkeeping services to the cryptocurrency network, you are paid in fractions of cryptocurrency that can add up to significant amounts over time. Because you are providing assistance in the form of verifying transactions, you are privy to earning rewards.
For a single individual, cryptocurrency mining can be something of a hobby or a fun way to earn small amounts of currency over long periods of time. The concept is very similar to low-risk investing by purchasing fraction shares on the stock market. If you are looking to make more profit by cryptocurrency mining, you would have to join a group of similar-minded individuals planning to pool together the group’s earned cryptocurrency and divide it evenly between each member. There is a lot of software involved in cryptocurrency mining as well and you will need to leave your computer running even when you aren’t sitting in front of it, thus leading to higher electricity costs and possibly damaging your computer with continual use. Cryptocurrency mining is not a way to get rich quickly or to provide a source of secondary income, but it is a relatively hands-off approach to earning a small amount of currency.
As far as getting started in cryptocurrency mining, you would need the following:
- A coin wallet. These are free, private databases that are protected by password and used to store potential earnings. They also keep network-wide records of all transactions.
- Mining software. Your package may include cgminer or stratum, but there are other software available.
- Membership in an online currency exchange. These exchanges allow you to swap virtual currency for conventional currency, as well as the other way around.
- A mining ASIC chip. This is specialized processing chip that will provide the accounting and mining services.
To recap: cryptocurrency mining is the act of utilizing specialized software to provide bookkeeping services to a cryptocurrency network in exchange for a reward in the form of cryptocurrency fractions. Cryptocurrency mining is not a means to amass vast amounts of wealth, but it can be an enjoyable hobby to earn small amounts of useable currency. That currency can be exchanged for conventional currency. Simply put, it is a way to gather digital currency to exchange for physical currency.