Mining provider comparison

Mining his is how you can generate cryptocurrencies most profitably

With the ongoing trend in cryptocurrencies , «mining» is also experiencing a major boom. The name comes from the mining sector, more precisely from «gold prospecting». Again and again you can read in reports that so-called «miners» generate crypto currencies such as Bitcoin. But what sounds so simple is no longer so easy to implement. For this reason, more and more cloud mining providers have established themselves on the market in recent years . These have the appropriate equipment (high-performance server) that is required today for mining crypto currencies. More on this in our cloud mining provider comparison .

That is why “prospecting” is becoming more and more complex

First we want to use the example of Bitcoin to explain what «mining» is all about . For comparison: if a gold digger comes across a vein of gold, he can usually dig a lot of gold quickly with relatively little effort. After a certain time of mining, the place where most of the gold was mined is empty. There is another gold deposit in the mountain. However, the gold digger has to go to a much greater extent in order to mine it.

How «mining» works

In order to understand why mining crypto currencies like Bitcoin is becoming more and more complex, one must first ask how the «mining process» actually works. Ultimately, mining is not just about generating new coins. Rather, the mining process is used to secure the security of the entire network (blockchain) .

Blockchain and hash

Mining provider comparison

So that the Bitcoin blockchain or the entire Bitcoin network can function at all, the individual lists of the transactions carried out in the network (the individual blocks) are checked and confirmed by all network participants. To do this, the information in a block (a complex sequence of characters) is converted into a code that requires significantly less storage space. This code is also known as a «hash». The list of these hashes, which are linked together, then represent the actual blockchain. It is precisely this task that the «miners» (network participants) take on. With the computing power provided, they calculate the hashes and, if they are successfully executed, are rewarded by the system with a certain number of bitcoins. Several participants can always work on a block.

But why is mining becoming more and more difficult for users?

The increasing difficulty is already anchored in the Bitcoin protocol. To this end, the inventor of Bitcoin, Satoshi Nakamoto, laid down certain rules for the crypto currency in 2009. First, he limited the number of Bitcoins that could be generated to 21 million. Around 16.5 million Bitcoins are already in circulation. As soon as the maximum amount has been reached, no more coins can be generated via the Bitcoin network.

In the beginning, the goal of the Bitcoin inventor was to bring new coins to the market as quickly as possible. That is why the miners received 50 Bitcoins for each completed block in the early days.However, Nakamoto has specified in the algorithm that the “reward” is halved every 210,000 blocks. As a result, Bitcoins are getting onto the market more and more slowly. There are currently 12.5 Bitcoins as a reward for each completed block.

The hash is also getting more complicated — why?

Halving is not the only reason, however. Another problem arises for individual miners. Normally, no noteworthy computing power was required to generate a hash. As already mentioned, everyone was able to mine Bitcoins with their own computer from the comfort of their own home. But the requirements are growing steadily. In the meantime, a simple PC is hardly enough to deal with the complexity of a hash.

Note: For this reason, the said mining farms (cloud mining providers) have been looking for a solution here. Individual miners can still actively participate in the mining process through these providers without having to provide their own hardware (computing power) or software.

As a private person, is it really no longer possible to “mine” in the normal way?

If you want to take part in the mining process yourself despite all this, you should always weigh up whether the achievable yield can be offset against the costs for the hardware and the electricity costs incurred. Because, as I said, the requirements are constantly increasing. In addition to the cloud mining providers, there is another option for individual miners. You can join the so-called «mining pools» . In these, the participants make their respective computing power available and thereby bundle it . If a reward is achieved for working on a block, this is later divided proportionally among the participants. This certainly has the advantage that the income is more regular and predictable fail.

Genesis mining features

The Genesis Mining Features at a glance

However, the respective providers charge fees for this . The prerequisites for a private computer must also be met. These relate in particular to the performance of the graphics card . The different providers naturally provide various special products that make efficient mining possible. However, whether the ratio of mining yield to electricity costs is actually satisfactory, especially in countries with high fees (e.g. Germany or Austria), must be critically questioned.

Cloud mining as an alternative investment?

For this reason , some companies have now specialized in so-called «cloud mining» . With these providers, the users do not provide their own computing power, but rent or buy the hash power. This means that the user does not have to provide any hardware or software himself in order to participate in the mining process . Rather, a contract is concluded with the provider in which, among other things, it is determined which cryptocurrency is created and over which period this should take place. This can be a lucrative business for both providers and users. It should be noted, however, that especially with theLong-term contracts are only profitable as long as the respective crypto currencies increase in value .

Basic knowledge for «miners»: the blockchain

Anyone who deals with the subject of mining or wants to deal with it in the future should know what the «blockchain» is.
More and more areas of application are currently being presented that are based on innovative blockchain technology. However, many people do not yet know what to do with the term “blockchain”. But anyone who deals with the subject of «mining crypto currencies» should also know what the blockchain is. In many places it is already being traded as a future technology . More and more possible applications seem to arise from this. Although it is based on a complex system, the principle is not that difficult to understand.

The blockchain as the heart of the network

The blockchain is a network that is usually only available on the internet . However, it can also be used in an intranet. The processed information is not stored on a single server, but on all computers that are active in the network. That is why the keyword “decentralization” is often heard in connection with the Bitcoin blockchain. “Decentralized” in this case means that the technology is a particularly secure variant for processing and storing information and data. Because in order to falsify or steal these, hackers would have to hack all computers participating in the network. Since this is next to impossible, the blockchain is considered to be very secure.

How is information stored in the blockchain?

A “block” can be thought of as a kind of Excel table. Of course, this is not a corresponding table. However, the structure is similar. With cryptocurrencies like Bitcoin , such a block has three important columns: User A, User B and the transferred sum X. One of the two users now transfers a certain Bitcoin sum to the other within the network. The transfer takes place from computer to computer. The entry is made anonymously in the table. This table (block) is located on all computers participating in the network. This means that all users automatically keep a kind of transaction book. This guarantees that the transaction has actually been carried out.

The processing of a «block»

After a certain time, the table is «full» and can be verified. Before this, every transaction that has taken place in the network is entered in the table (block). Similar to Excel tables, the loading time increases with the size. For this reason it is not possible to continue the table permanently. This is why it is completed, confirmed and saved after a certain amount has been reached . A finished “block” is thus created.

After completing a block, a new table (new block) is started, which in turn is filled with a certain number of individual network transactions. All blocks created are then chained together.This chain of blocks is called a «blockchain» .

Another background information on the blockchain

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In Bitcoin, a «block» is 1 MB (megabyte) in size. After the Segregated Witness (Segwit) update was carried out on August 1, 2017, more space is available in a block to be able to outsource various data (signature transactions). The previous lack of space in the blocks had the disadvantage that only a limited number of transactions could be carried out per second. The spin-off of Bitcoin Cash is also due to this problem. There the blocks were then expanded to a size of 8 MB. However, the signature of the transactions was not outsourced.

Safe storage of the coins in a wallet

Finally, the «wallet» should be mentioned, which is needed as a digital purse to safely store virtual currencies such as Bitcoin . As already mentioned, the «blocks» only have a limited memory space. Thus, the cryptocurrencies or the corresponding data are stored decentrally in the server of an online wallet provider or your own computer. This means that the credit held by a network participant is stored locally , while the entire network collectively records all transactions.

The wallet is a virtual purse that works in a similar way to a checking account.In the real sense, it is a program on your own PC or on the server of a wallet provider. The local storage of a coin is possible because each individual coin has a unique ID. While with the so-called FIAT currencies (classic currencies such as euros or US dollars) the equality of the unit is central, with digital currencies each individual coin can be identified. Of course, the individual coins are still worth the same.

The offline wallet for the safe and long-term storage of crypto coins

While the storage of cryptocurrencies in online wallets is particularly suitable for flexible trading, this storage method also has a weak point . While it is normally not possible to falsify transactions in the blockchain, the security of your own coins on your home computer or the server of a wallet provider can be at risk.

The so-called «private key» is used to access your own wallet . This is the private key or code that only the owner of the respective wallet or Bitcoin address has . This key should always be kept safe and not passed on to third parties. As an alternative andFor secure storage of credit, the (additional) use of so-called hardware wallets is recommended . This is usually a powerful USB stick with special software. This «cold wallet» is also a purse for storing crypto currencies, but in physical form. Since this is normally not connected to the Internet, it is a particularly secure storage location for digital currencies .

What is cloud mining?

In Europe in particular, it is hardly worthwhile to take part in the mining process as an individual. The costs for the CPU, graphics cards and electricity are simply too high. If you still want to benefit from crypto computer mining , but cannot mine coins yourself for various reasons, you can use the services of a so-called cloud mining provider . These maintain real mining farms (powerful servers) in countries where electricity is still comparatively cheap.

With cloud mining, computing power is rented from a provider in order to generate crypto currencies such as Bitcoin, Ethereum or others.This service is specified in advance in a corresponding contract. After the interested party has paid the contractually stipulated fee, the cloud mining provider’s servers start mining the selected cryptocurrency.

One of the biggest advantages of cloud mining is that the buyer does not need any technical knowledge besides his own wallet. He also does not have to provide the computing power or hardware himself in order to be able to mine cryptocurrencies. Rather, the money is invested in a cloud mining contract. The provider with whom the contract was concluded then takes care of the rest of the process. Well-known cloud mining providers are, for example, HashFlare or Genesis Mining .

Cloud mining: the three success factors

Cloud mining is an interesting alternative to classic mining. Each user has to weigh up the advantages and disadvantages individually . In general, of course, there are high risks with every investment, especially in the field of cryptocurrencies.

Whether cloud mining is worthwhile for the individual depends on three important factors:

  • The chosen contract term.
  • The mining difficulty.
  • The course of the respective cryptocurrency.
  1. The contract period
    Contracts with an unlimited term are becoming increasingly popular. For both sides, these usually represent a positive opportunity to participate in the mining process in the long term. However, the so-called «lifetime contracts» are automatically terminated by most cloud mining providers if the maintenance fee (maintenance costs) exceeds the income from mining.
    If, for example, a user mines bitcoins in the cloud and more electricity and computing power is required than revenue can be generated from it, the cloud mining provider can terminate the contract. This is a common method that is also intended to protect the user himself.After all, in the end he shouldn’t pay more than he takes in. However, if the rate of a cryptocurrency continues to rise, such a contract can be continued permanently with the maintenance costs remaining the same.
  1. The mining difficulty
    It is well known that there is a certain algorithm behind a mining process. In order to keep creating new blocks of a cryptocurrency in the blockchain, more and more computing power is required. This also increases the difficulty of mining. This means that the search for a new «coin» is becoming more and more difficult.
    With cloud mining, a user rents a corresponding computing power (hash power) . This means that he basically buys these from the cloud mining provider. As so-called mining pools are usually worked together in cloud mining, the participants receive a corresponding share if a block is found (depending on the computing power provided).
  2. Course of the cryptocurrency
    In the field of cryptocurrencies, there are always strong price fluctuations. Cloud mining is also affected by this. Of course, the most important thing here is which cryptocurrency is mined.
    Basically, the more the price of a cryptocurrency rises in the course of the contract period, the better the profitability.

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