Cryptocurrencies mining: how it works (for beginners)

Written by Haegmer
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Cryptocurrency mining: how it works

In the beginning, mining is the process through which useful materials (or minerals) 

are extracted from the earth (industry farms). Today, in the cryptocurrency industry, 

mining is the process by which new coins are generated from a cryptocurrency 

transactions system. How does this work?

Mining process: the case of bitcoin

Each mining activity uses a certain algorithm. For bitcoin, the mining uses SHA-256 to 

achieve transactions. During transactions, heavy computational work ensures 

transfers and their validation. What is really going on? In two words, the system 

generates a string of 64 characters called a hash for a block of transactions that has to 

be verified by miners (who have to generate identically the hash through the network 

with their computers). The first miner whose computer does this gets attached to the 

block and gets the reward. Miners are paid via that mechanism called PoW (Proof of 

Work). Other miners in the network check if the block is correct and the mining goes 

ahead. Through that mechanism, transactions that are occurring, are validated and a 

bit of coin (new blocks) are generated from the network. This is a great difference from 

the traditional currency transactions during which no money is generated, but fees 

are paid. Mining appears then like a digital service an individual (the miner) offers to 

the transactions network through his computer’s graphics card (GPU), Central 

processing unit (CPU), or ASIC mining rigs and at the end gets a reward.

The total amount of bitcoins that the bitcoin network dedicated for mining is estimated at 

21 million. These days a new way of earning coins is staking. For this, proof of 

staking (PoS) is needed to get paid. This activity will probably replace mining activity 

when it will not be possible to mine.

Mining types and tools

Mining is achieved with various tools (hardware + software): ASICs mining (ASIC 

stands for Application-Specific Integrated Circuit); graphics processing unit (GPU) or 

Central processing unit (CPU) of computers and scarcely of mobile phones. Therefore, 

there are two main manners of mining: Direct and Indirect mining processes. The first 

one is realized with hardwares+softwares connected to a mining pool. The miner uses 

his own equipment to participate in the mining activity and get rewards from the 

mining pool. He installs software that is provided by the mining pool and connects to 

it via a URL. This kind includes many types (ASICs mining, GPU or CPU mining, 

Farms mining). With the second kind, the miner invests in the mining activity of a 

mining pool or platform that grants to him a certain amount of hash rates and/or 

dedicates for him certain mining equipment (Cloud mining, 4th type). The miner’s 

profits depend on the amount he invested in the mining activities. In this case no need 

to buy equipment. What are the mining industry infrastructures?

Mining industry

When you mine a coin, you become a miner, but it is important to note that all 

cryptocurrencies are not mine-able. There are different infrastructures in the mining 

industry. First the Mining farms: They are Giga-data centers that are involved in 

mining cryptocurrencies as big industries. For example, the best farms for bitcoin 

mining are Dalian (China); Genesis mining farm (Iceland); Moscow (Russia); Linthal 

(Switzerland); Bitfury (Netherlands ), Gigawatts (USA).

Mining Pools:

They are great data centers that mine one or various coins. They provide mining software for 

individuals who after installing them on their computers and scarcely on phones, 

connect them to the Mining pool via a URL as said previously, and hence participate in 

the mining activities. According to the power and efficiency of their equipment, they get a reward.

Individuals mining:

As said previously, if you have a powerful ASIC mining

rig or a good desktop or laptop with powerful GPUs or CPUs, you may mine cryptocurrencies

as an individual at home. Just install the equipment and connect it to a mining pool.


Nowadays, it is possible to mine coins through websites or apps. ECOS cloud mining is a good example.

Besides this, there are some browsers that use your PC or phone to mine coins and pay you a 

reward. Example: CryptoTab browser. You may earn coins through the Net browser and 

Brave browser too. Unfortunately, a lot of fake websites/apps are increasing on the internet 

so everyone must stay clever and keep their eyes open.

In conclusion, to be profitable, mining requires expensive tools today because they are 

more efficient. Before joining that activity, you have to consider those criteria to avoid 

high energy bills because efficient tools are high-energy consumers. Therefore, instead 

of buying expensive equipment yourself, you may simply buy a low price contract on 

a platform like ECOS cloud mining platform that provides for users adequate hash rates 

for mining and tools to create their online small mining farm.

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