What Is Crypto Mining? Cryptocurrency Mining Explained

Cryptocurrency mining, crypto mining for short, is a means to create a new digital currency known as coins. However, you don’t simply make these coins. Instead, you must usually “mine” them using a computer to solve complex puzzles and mathematical equations, verify crypto transactions on a blockchain network, and add them to a ledger. Since the crypto market is decentralized, the verification process helps keep the crypto network secure, and with crypto coins as a reward, you get rewarded with new coins. To mine, you must be a verified miner, as it’s easy for untrusted users to manipulate the system.

Use this guide to learn more about cryptocurrency mining, how it works, how to get into it, any special skills and hardware you may need, and more. 

How does crypto mining work?

Crypto mining occurs when a transaction occurs between two crypto wallets. This transaction requires verification and logging onto the blockchain. The transaction forms a block you put through a special algorithm, a practice known as “hashing,” to assign each block a “hash”—a 64-digit hexadecimal.

What does a miner do?

As a crypto miner, you will use computer technology to solve these complex problems—effectively cracking the code—that reviews and authorizes the transaction. As a reward for your work, you receive cryptocurrency. You then add the transaction data to an encrypted public ledger—blockchain.  Delve into a more detailed review of mining cryptocurrency to better understand the process.  

Nodes review the transactions for legitimacy.

When a cryptocurrency transaction occurs, a node validates its legitimacy, relays the transaction to the network, and stores the transactional information. Nodes are voluntarily operated computers verifying blockchain transactions via preset consensus rules. 

Multiple transactions combine to form a block.

Once a node verifies a transaction, it places it in a “pending” state. Crypto miners then place these pending transactions into unconfirmed blocks. This block traverses the network across all nodes to validate itself as following the rules of that network, after which it attaches to the previous block, forming the blockchain. 

The unconfirmed block now contains a hash and other types of data.

The newly formed block now contains a hash output or signature that begins with a specific number of zeros combined with random letters and numbers. The hash output depends on the data inside the block, which is the hash input. Inside the block header is also a nonce, the number a miner must match to solve the block and access the transactions within the block. Nonce is an abbreviation for “number only used one.” 

Miners ensure a block’s hashes to verify it is legitimate.

As a crypto miner, you’ll use a computer to randomly change the nonce until the hash output matches the signature. If you match the signature before other miners do, you broadcast the block and signature to other miners on the network. These other miners verify the signature’s legitimacy by hashing it and seeing if the hash output results in the required signature. 

The block goes on the blockchain.

If the other miners confirm the signature matches and is legitimate, they then publish your block to the blockchain. At this point, the process begins again.

Proof of work in crypto mining

You’ll often hear the term proof of work in crypto mining, which confirms that you used resources to solve the signature. Typically, the resources involved are the computational power of your mining hardware and the electricity you use. 

Read more: Cryptocurrency: What Is It and How Does It Work?

Types of crypto mining

As a crypto miner, you can choose from several ways to mine. You can mine as an individual, in the cloud, or as part of a larger pool of miners. Examine how each works in more detail to help guide you in choosing the method that will work best for your circumstances. 

Individual miners

Many miners work as individuals with their hardware set up in their homes. These miners can mine using three types of hardware, including: 

• Application-specific integrated circuit (ASIC): An ASIC miner is a hardware that specializes in one function: mining a specific cryptocurrency. It is the most powerful and profitable option, but these machines also cost thousands of dollars.  

• Graphics processing unit (GPU): The typical mining machine or rig is a computer with at least one high-end GPU. A top-notch GPU is costly, so it involves an upfront investment but is cheaper than an ASIC. Remember that while a GPU mining rig will work for a wide range of cryptocurrency mining, it lacks the processing power to keep pace with an ASIC.

• Core processing unit (CPU): CPU mining is simply using your computer's processing unit to mine for crypto. It is the most accessible way to enter crypto mining, but it has a massive flaw. CPU mining is not possible for Bitcoin and many other types of cryptocurrency because it can’t come close to the processing power of an ASIC or GPU mining rig. However, it may be suitable for some currencies, such as CryptoNight-based coins and Monero. 

Mining pools

As part of a mining pool, you’ll work with a group of other miners who pool their resources to increase their chances of mining new blocks. These pools generally have minimum hardware requirements, consisting of an ASIC or GPU mining rig.

Cloud mining

Cloud mining is likely one of the easiest ways to get into crypto mining. Plus, it doesn’t require you to purchase expensive hardware. Instead, you sign on with a company that already has mining equipment in place, and you pay a fee to rent the hardware and cover the cost of electricity. 

The company handles all the mining, and you simply take a portion of the profits. Your profits, however, will depend on the company’s computing power. The more computing power the company has, the more blocks it will earn. 

Read more: What Is Crypto? (Types, Benefits, and How It Works)

How do I become a crypto miner?

Becoming a crypto miner requires a handful of steps and resources, starting with a place to store your crypto and the software and hardware needed to mine the coins. Explore the basics of starting a career as a crypto miner to begin planning your journey.

• Crypto wallet: You need a place to store the crypto you mine. A cryptocurrency wallet is a place to store the keys that give you access to the coins you’ve earned through mining. You can choose an online wallet or a “cold wallet,” which is not online. 

• Software: You’ll also need crypto mining software. You can find a wide range of crypto mining software online. Choose one that suits your needs and the type of cryptocurrency you plan to mine. 

• Hardware: You also need hardware to start crypto mining. You can run your mining operation from a standard PC, but you’ll likely struggle to keep up with other miners’ superior computing power. Your mining rig will likely need to be at least a PC with a powerful GPU. If you plan on profiting, you’ll likely be better off with a powerful ASIC mining rig. You’ll also need an efficient power supply to run your mining rig if your hardware doesn’t include it. 

Solo mining vs. pool mining

When you become a crypto miner, you must also decide what type of miner you’ll be: solo or pool. Both require upfront investments, but one is generally higher risk and reward, whereas the other is more stable and predictable but typically offers lower rewards. 

Solo mining is a high-risk, high-reward venture, as you use only your own resources to mine. You’ll compete with mining pools and large corporations with immense computing power, which can make it challenging to mine a block. However, when you mine a block, the reward is far higher than any other mining type.

As a pool miner, you allow the pool to add your mining rig to its existing network, increasing its computing power. The pool then sets up a proportional reward system based on the computing power each miner contributes. As the pool mines blocks, you receive your proportional reward. The payout is generally far lower than solo mining, but the chances of mining a block as a pool are far higher than a solo miner. This makes it a more stable and predictable model. 

What skills and computing resources do you need to be successful in crypto mining?

You won’t need any superior technical skills to become a crypto miner unless you plan to build your mining rig. Computing resources are a crucial part of being a successful crypto miner.  

You can buy a powerful GPU to remain relatively economical but somewhat competitive. A higher-rated crypto mining GPU might run at many megahash-per-seconds (MH/s). One megahash is 1 million hashes. 

You’ll want an ASIC mining rig to be competitive as a crypto miner. These offer superior computing power and are more energy efficient than GPUs. However, choosing the cryptocurrency to mine and building the ASIC specifically to mine that currency would be best. A terahash equals 1 trillion hashes, making a 68TH/s ASIC capable of performing 68 trillion hashes per second—1,000 times faster than the top-rated GPU. 

What qualifications do you need for crypto mining?

You need no specific qualifications to become a crypto miner but must meet minimum hardware requirements to join a mining pool. Each pool has its minimum requirements, so check with the pools you want to join to see if your mining right meets the minimum requirements. Pools typically require you to have a GPU or ASIC system. 

Courses and certifications that can help with crypto mining

The more you understand cryptocurrency, the more skilled a miner you can become. This is where certification and courses can help. A few to consider include: 

Certified Cryptocurrency Expert (CCE)

The CCE is a four-hour, self-paced, online certification program offered through the Blockchain Council. It includes courses in the basics of blockchain, crypto and crypto mining, fundamentals of crypto trading, risk management, stock market and crypto comparisons, and more. The CCE certification can help you enter or invest in crypto as a career. 

Certified Bitcoin Professional (CBP)

The CryptoCurrency Certification Consortium (C4) offers several crypto certifications, including the CBP. This certification helps you gain knowledge of the Bitcoin blockchain, Bitcoin transactions, and how the Bitcoin network operates. It can help you gain some of the knowledge that is helpful to be an individual Bitcoin miner, or it can help you land a career involving Bitcoin, such as: 

• Accounting

• Sales and marketing

• Education

• IT professional

• Project manager

Certified Ethereum Professional (CEP)

C4 also offers certification in another popular cryptocurrency, Ethereum. Like the CBP certification, you’ll learn about the blockchain and transactions. It’ll also help you learn about the Solidarity programming language, one of the programming languages for Ethereum’s smart contracts. A CEP certification will help you if you want to make Ethereum your career as a developer or software engineer, application architect, accountant, education, IT, or other roles where Ethereum will be a large part of your daily life. 

Read more: Blockchain Certification: Which To Choose?

Cryptocurrency and Blockchain: An Introduction to Digital Currencies

As a beginner in the cryptocurrency space, you must understand the basics of digital currencies. Wharton University of Pennsylvania offers Cryptocurrency and Blockchain: An Introduction to Digital Currencies. This course can help you learn the framework of cryptocurrency and the blockchain, analyze digital signatures, assess crypto’s risk as an investment, and more.

Do you need a degree to do crypto mining?

While you don’t need a college degree to become a crypto miner, a degree can help if you plan to make crypto a part of your career. These potential careers include the following: 

• Technical writer

• Business development representative

• Marketing manager

• Web developer

• Software engineer

• Financial analyst

• Data scientist

• Machine learning engineer

The degree program you choose may depend on the area you want to specialize in. For example, if you plan to become a cryptocurrency analyst, consider a bachelor’s degree in business or finance with courses in blockchain and crypto. 

If you plan to become a marketing manager, you’ll want at least a bachelor’s degree in business administration, though a master’s degree would be helpful. 

On the technical side, if you plan to work in web development in the crypto segment, you will want to earn at least an associate degree in computer science. However, a bachelor’s degree will typically help you reach more senior roles. 

If you want to develop software focused on crypto mining, software engineering is your route. To become a software engineer, you can earn a bachelor’s degree in computer science or software engineering. Again, finding a college with courses focusing on blockchain and crypto will be helpful. 

If crunching numbers and evaluating trends in crypto is enticing, being a data scientist may be a good path for you. To become a data scientist, you’ll need at least a bachelor’s degree in IT, computer science, mathematics, business, or another closely related field. 

Choosing cryptocurrency mining apps

With your crypto mining rig installed and a good understanding of blockchain and mining, it’s time to start mining. However, you must first choose the free mining software or app you’ll use. Your choice will depend on how you plan on mining. 

Choosing a cloud mining app could help you avoid the hardware costs altogether. With these apps, you essentially pay to rent the mining hardware and earn some of the profits. It is generally the quickest and easiest way for a beginner to get into crypto mining. 

Finally, if you’re an advanced crypto miner and don’t want to share your profits, you can purchase a mining rig and sign up for a solo mining app or software. 

Examples of cryptocurrency mining apps

You'll find no shortage of crypto mining apps on the market today. A few popular ones and what they offer include: 

• Kryptex: You can download this mining pool app to your Windows PC. It uses your computer or mining rig’s computing power to help the pool mine for crypto. When the pool mines a coin, you get a portion of the profits based on the computing power you contribute. You can withdraw crypto in the form of Bitcoin or Ethereum from your account and use it or send it to your bank card as US dollars or other real-world currencies. 

• BetterHash: Another mining pool app you can download to your PC, BetterHash offers access to ten different types of cryptocurrency to mine. It also has an intuitive Profit Switching feature that performs periodic benchmark tests on your mining rig and matches it up with the most profitable crypto based on its specifications. 

• Cudo Miner:  This mining pool app is similar to BetterHash in that it mines multiple coins and automatically switches to the most profitable crypto for your mining rig. However, it also has a feature for internet cafe owners, where they can use vacant computer stations to mine, helping them earn profits from idle computers. Once you log on to play a game, the computing resources revert to gaming use, so you won't experience lag in your game. 

• ECOS: This service is primarily a cloud mining service requiring an investment of at least $150 for a minimum of 24 months. It uses that investment for mining operations [1]. You then reap a portion of the profits from the mining. You need no equipment, and you can get daily payouts on your investment. 

Learn more about crypto mining on Coursera.

Crypto mining uses computing power through various nodes and miners to verify crypto transactions and add to the blockchain, with the miner who solves hash receiving cryptocurrency as a reward. Continue learning and building your knowledge and skills to take your crypto mining interest to the next level with online courses.

For example, Duke University offers an online Blockchain Business Models course on Coursera. This course provides information about blockchain and how it creates value through cryptocurrency tokenization. You’ll also learn about the practical applications of crypto. Or try the Bitcoin and Cryptocurrency Technologies from Princeton University, also on Coursera, to delve into the Bitcoin network and how blockchain works.