Crypto Mining

The 5 Different types of cryptocurrency mining that you need to know

Most of you reading this know the different types of hardware’s that are used to mine cryptocurrency. But beginners who are new to this space and are interested in mining cryptocurrency do not know where to start or how it works.

As Bitcoin and Altcoins are in the new market cycle we see new people every single day develop interest towards cryptocurrency mining and guess what? Bitcoin network recently hit an all time high hashrate of 120 Million TH/s which converts to 120 ExaHash.

If you are new and wondering how to mine cryptocurrency or looking for different crypto mining options then this post is for you. Here we’ll cover a little about crypto mining and why people mine it. Then in detail we’ll explain the different methods in which you can mine cryptocurrency along with their pros and cons.

Why mine cryptocurrency?

First of all the only reason why people bother to mine cryptocurrency is because they can make money out of it. But not all of them. Only those who have researched and invested in the right method will get the ROI and continue to make passive income out of it.

Now before we see the different types of cryptocurrency mining let’s quickly understand what mining means in cryptocurrency.

Understanding cryptocurrency mining

To better understand let’s compare cryptocurrency mining with gold mining. When it comes to mining both Gold and Crypto are quite similar. Gold mining is a physical task where gold mining machines are used to dig the ground for some precious gold. Now cryptocurrency mining is same; but instead of physical task the machine (computer) solves computational mathematical puzzles to obtain some cryptocurrency.

To fully understand the concept of earning money through mining we suggest you to go through this article about Block rewards. It explains what Bitcoin mining is, why miners solve the puzzle and how miners are rewarded for solving a proof of work solution.

Now that you’ve understood cryptocurrency mining let’s move on and see what are the different ways in which you can mine cryptocurrency.

Types of cryptocurrency mining

Interested in mining cryptocurrency but don’t know where to start? There are 100s of proof of work cryptocurrencies that you can mine. So first decide on the coin that you’d like to mine. Then to start mining the currency you fundamentally need a hardware.

Different hardware types used in crypto mining

Each coin uses a specific mining algorithm and each of those algorithms can only be mined using specific hardware’s.

For example:

Bitcoin uses SHA256 hashing algorithm and so it can only be mined using SHA256 ASICs

Litecoin uses Scrypt algorithm; therefore it can only be mined using Scrypt ASICs.

Dash uses X11 which again requires X11 ASIC.

Ethereum uses Ethash PoW algorithm which was previously mined using general purpose hardware like GPU. But currently miners with Ethash ASICs are only profitable.

Now what is an ASIC? ASIC (Application Specific Integrated Circuit) is a machine that is simply designed to mine a specific algorithm and they are only good at that. You won’t be profitable if you mine ASIC coins using GPU or CPU. But not to worry there are 100s of other coins that are ASIC resistant.

Monero for example uses RandomX Proof-Of-Work algorithm which is only optimized for general-purpose GPUs and CPUs. But what if you don’t have a GPU or any specific hardware but still interested in mining. Now this is where cloud mining comes into play.

Type 1: Cloud Mining

This is the only method where you can basically mine any type of cryptocurrency without investing in a hardware.

Cloud mining is a kind of crypto mining process that utilizes remote data center with shared processing power. It allows user to mine Bitcoin and / or any altcoins without the need of hardware. So how it works?

cloud mining cryptocurrencies

Basically the cloud mining company owns and runs all kinds of mining hardware’s at their warehouse. These companies are usually large mining facilities with multiple farms hosting thousands of mining rigs.

All you have to do is pay the company and rent out some of their mining hardware. It’s not that you are physically renting out the hardware but you are just paying for the hashpower. Based on the amount of rented hash rate you’ll earn share of payments from the revenue generated by the hashpower you purchased.

Just Google cloud mining or mining rig rentals and you’ll find several sites offering this service. Do your research and find the best one that suits your needs.

Type 2: ASIC Mining

If you wish to invest in a mining hardware to mine top cryptocurrencies like Bitcoin, Ethereum, Litecoin and Dash then you need to research on ASIC machines.

ASIC as we said is an Application Specific Integrated Circuit machine which is developed to only mine a specific algorithms. For example you cannot mine Ethereum or Litecoin using your Bitcoin ASIC miner. You need a specific hardware for those coins.

mining using ASIC

ASICs are powerful and more energy efficient in comparison with GPU and CPU mining. But the problem with ASICs is that every year a new powerful machine comes into market making the previous models obsolete.

Once a competitive machine comes out your old machines will just become a paper weight. They don’t have any other use apart from mining that specific algorithmic coins. Another problem is not everyone can get these machines as there are huge wait periods.

Only few companies make these kinds of machines and they only sell it in batches.

This is one of the reason why majority of mid to low cap coins stick to GPU or CPU mining still.

Type 3: GPU Mining

GPU mining is the most popular method used in mining Altcoins.

Are you a gamer or a designer working with 3D models then most probably you have a GPU on your PC. Using your GPU you can basically mine any coins. But to be on the profit side you should find and only mine coins that offers ASIC resistance.

Identify your GPU model and head to WhatToMine mining calculator. Input your GPU model and the website will show the list of coins that your GPU will profit from. But before you mine a certain coin using your GPU understand the risks of mining from PC.

gpu mining type

If you wish to utilize your GPU 24 x 7 for mining then do not mine from your PC. Instead build a dedicated GPU mining rig which you can build one for around $3000. But the problem with GPU mining in current scenario is that it is hard to get your ROI.

Google is your friend. Do your research thoroughly before you invest in building a GPU mining rig.

Type 4: CPU Mining

CPU mining is the oldest method of all. It was first proposed by Satoshi as 1 CPU = 1 Vote and Bitcoin in its early days was mined using CPU.

While GPU mining utilizes GPU power, CPU mining uses CPU processing power to mine cryptocurrencies. It was the only option in the early days of Bitcoin. But currently you’ll rarely come across coins that allows CPU mining. The reason is it is extremely slow and less energy efficient compared to GPU mining.

Anyways there are still coins that you can mine using your CPU particularly CryptoNight coins. But be extremely cautious before you utilize your CPU for mining. Mining can cause your CPU to overheat and it will make your other tasks too slow.

Type 5: Mobile Mining

Above are the 4 common ways that are used to mine cryptocurrency. Plus here is another method known as mobile mining. It is not so popular and is only adopted by a very few low cap altcoins.

You may wonder; when CPU mining is not even viable anymore how is mobile mining possible? Mobile mining is not a thing and it will never be effective as other methods. But still there are some coins trying to implement this method to attract new user towards mining.

Now that you’ve understood the different types of cryptocurrency mining you might be wondering which coin to mine.

As we said each coin uses specific algorithm and each and every hardware’s are good at mining a specific algorithm. To find out the most profitable coin to mine always use the mining calculators. It will help you to pick the right coin to mine based on the hardware you own.

Note: Cryptocurrency mining can be risky as you are basically dealing with a speculative asset class. You may or may not get your ROI. So do your own research before you invest in a mining rig.

Hope this helps. Here are few other mining related guides that you’ll also find helpful.

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We are crypto enthusiasts and our main intention with Coin Guides is to educate people about Cryptocurrency and Blockchain technology. We regularly publish content about Bitcoin, Ethereum, Altcoins, wallet guides, mining tutorials and trading tips.

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