Cryptocurrency Mining For Dummies

Peter Kent and Tyler Bain are coauthors of Bitcoin For Dummies, 2nd Edition. Peter created the Crypto Clear video course to assist would-be investors in understanding cryptocurrency. He is also the author of SEO For Dummies. Tyler is a professional electrical engineer and an active crypto miner.

• Introduction 1About This Book 1Foolish Assumptions 2Icons Used in This Book 2Beyond the Book 3Where to Go from Here 3Part 1: Getting Started with Cryptocurrency Mining 5Chapter 1: Cryptocurrency Explained 7A Short History of Digital Dollars 8First, take the Internet 8Add credit card confusion 8Add a dash of David Chaum 9Result? DigiCash, E-Gold, Millicent, CyberCash, and More 10The Bitcoin white paper 10Bitcoin: The first blockchain app 11Who (or what) is Satoshi Nakamoto? 12What’s the Blockchain? 13Blockchain around the world — the blockchain network 13Hashing: “Fingerprinting” blocks 14Blockchain is “immutable” 15Where’s the Money? 16What’s the Crypto in Cryptocurrency? 18Public Key Encryption Magic 20Messages to the blockchain 21Signing messages with the private key 22The blockchain address — your money’s home 22Sending a transaction message 23Unraveling the message 24The Basic Components of Cryptocurrency 25What’s in a wallet? 25Private keys create public keys 26Public keys create blockchain addresses 26The private key controls the address 26Where Does Crypto Come From? The Crypto Mines (Sometimes) 27Chapter 2: Understanding Cryptocurrency Mining 29Understanding Decentralized Currencies 30Exploring the Role of the Crypto Miner 31Making Cryptocurrency Trustworthy 32Reaching Agreement through Consensus Algorithms 34Looking at the Cryptocurrency Miner 35Making the Crypto World Go ‘Round 37Chapter 3: Building Blocks: The Transaction’s Journey to the Blockchain 39The Cryptocurrency Network 40Submitting Transactions 44Looking at transaction fees 44Change address 46Verifying the transaction 47Competing for Bitcoin, the ten-minute contest 48Winning the Bitcoin 50Chapter 4: Exploring the Different Forms of Mining 53Proof-of-Work Algorithms 53Proof-of-work applications 55Proof-of-work examples 56Upsides 58Downsides 59Proof-of-Stake Algorithms 60Proof of stake explained 60Proof-of-stake selections 62PoS example cryptocurrencies 63Upsides 64Downsides 64Hybrid Proof of Stake/Proof of Work 65Hybrids explained 66Hybridized examples 68Upsides 68Downsides 69Delegated Proof of Stake 69Delegated Byzantine Fault Tolerance 69Proof of Burn 70And More 71Part 2: the Evolution of Cryptocurrency Mining 73Chapter 5: The Evolution of Mining 75Proof of Work Mining Evolution 76CPU mining 76Adoption of GPUs 76Rise of the FPGAs 77Dominance and efficiency of ASICs 77The Days of Solo Mining 79Pool Mining 80What is a mining pool? 80Choosing a pool 81Pros and cons of pool mining 82Cloud Mining 83Pool mining versus cloud mining 84Pros and cons of cloud mining 84Chapter 6: The Future of Cryptocurrency Mining 85Incentivization of Energy Exploration 85Underutilized hydroelectric dams 86Oil and gas flaring 87Continued Computational Efficiency Improvements 88Doing more with less 88Approaching the limits of physics 88Corporate and Nation State Participation 89Nation states 89Corporations 91Future speculation 91The Mythical Miner Death Spiral 92Block difficulty 93Block difficulty adjustment algorithm 93Miners of last resort 95Part 3: Becoming a Cryptocurrency Miner 97Chapter 7: Mining Made Simple: Finding a Pool and Preparing an Account 99Understanding How Pool Mining Works 100Choosing a Pool 102Pools that are good starting points 103A few of the largest pools 103Incentives and rewards 105Pool ideology 108Pool reputation 108Pool fees 110Pool percentage of the total network 110Setting Up a Pool Account 113Server choice 113Mining equipment pool settings 113Payout addresses 114Payout thresholds 115Researching Mining Pools 115Cloud Mining 116Working with Cudo Miner 118Chapter 8: Picking a Cryptocurrency to Mine 123Determining Your Goal 124Mineable? PoW? PoS? 126Researching Cryptocurrencies 127Mining profitability comparison sites 127Algorithms and cryptocurrencies 131The cryptocurrency’s details page 138Mining-profit calculators 140The cryptocurrency’s home page 141GitHub 142The cryptocurrency’s Wikipedia page 143Mining forums 144Going Deep 144Longevity of a cryptocurrency 144Hash rate and cryptocurrency security 145Community support 146Knowing That Decentralization Is a Good Thing 148Finding Out It’s an Iterative Process 151Chapter 9: Gathering Your Mining Gear 153Selecting the Correct Computational Mining Hardware 153Specified hash rate 154Specified power consumption 156Equipment cost and other considerations 161Length of time your hardware will be viable 162Mining Equipment Manufacturers 164ASIC rig producers 164Mining container producers 165GPU rig producers 165Finding a Wallet to Store and Protect Your Private Keys 166Where to Mine? Selecting a Viable Location 166Vet your home for cryptocurrency mining 166Communication requirements 167Power source thoughts 168Data centers and other dedicated commercial locations 172Chapter 10: Setting Up Your Mining Hardware 175ASIC Mining Rigs 175Racks 176Power supply 177PDUs 179Network and Ethernet connection 180A computer to control your rig 181GPU Mining Rigs 183Getting your GPU rig online 183Building your own GPU miner 185CPU Mining 195Mining Software 196Pool mining 196Solo mining 200Part 4: the Economics of Mining 201Chapter 11: Running the Numbers: Is It Worth It? 203Factors That Determine Mining Profitability 204Cost of equipment 204Hash rate of your equipment 206Mining rig efficiency 210Cost of electricity 213Total network hash rate 217Information about your pool 217Block earnings 218Cryptocurrency conversion rate 218Calculating Your ROI 218Your block earnings 219Your expenses 223Calculating ROI 223Knowing the unknowns 224Online profitability calculators 225Historical estimates 226Chapter 12: Reducing Negatives and Gaining an Edge 229Profitability through Efficiency 230Upgrading aging equipment 230Mining different cryptocurrencies 230Using exhaust heat 231Reducing electricity bills 232Knowledge Is Power 234Why current events are important 235The “fork wars” 236Your forking decisions 240Here Today, Gone Tomorrow 244Evaluating Your Mining Resources 245Increasing mining competition 245Increasing block difficulty 245Diminishing returns due to halving events 246Chapter 13: Running Your Cryptocurrency Business 249What to Do with Your Mined Cryptocurrency 250Convert your cryptocurrency 250Buying equipment and paying bills 250Paying with crypto when you can’t pay with crypto 251Expand or upgrade your mining operation 253But don’t forget the tax 253Hodling your cryptocurrency 253Invest your cryptocurrency 255Donate your cryptocurrency to charity 256Gift your cryptocurrency 256Determining When to Sell 257Cryptocurrency market indicators 257Where to sell: Cryptocurrency exchanges 260Dollar Cost Averaging 260Dollar cost averaging your purchases 261Cost averaging your exits 262Custodial exchange risk 262Tax and Your Mining Business 263But you’re mining, not investing 263It gets complicated 264Scaling Up? 265Do not overextend 266Milestones to meet before you reinvest 266Planning your expansion 268Part 5: the Part of Tens 271Chapter 14: Ten (or So) Tips for When the Market Dips 273Have a Plan, Hedge Your Mine 274How Long Can You Last? 275Learn from Market History 277Don’t Panic! (Keep Calm and Carry On?) 279Buy the Dip 280Look for the Advantages 281Anticipate the Market Recovery 281Learn From Your First Dip 282Consider Market Volatility 283Switch to Another Cryptocurrency 285Stop Mining! 286These are simple calculations 287Stop or go? 289Chapter 15: Ten Ways to Boost Your Return on Investment 291Doing Your Homework 291Timing Your Entry 292Playing the Markets 293Identifying Low Hash Rate Alternative Cryptocurrencies 293Mining the Start of a Chain 294Starting Small 297Scaling Choices 297Finding Cheap Electricity 298Cooling Efficiently 299Scoring Hardware Deals 300Chapter 16: Ten Types of Cryptocurrency Resources 303Cryptocurrency Market Trackers 304Mining Profitability Estimation Tools 304Cryptocurrency Reddit Pages 304Blockchain Explorers 305Data Visualizations 306Cryptocurrency Data and Statistics 307Cryptocurrency Wikis 307Cryptocurrency White Papers 308The Satoshi Nakamoto Institute 308A Cypherpunk’s Manifesto 309Bitcoin Guides and Walkthroughs 309Chapter 17: Ten Criticisms of Cryptocurrencies and Mining 311Energy Consumption 312Wasted Processing 315Scalability, Transaction Speed, and Throughput 317Coin Distribution Fairness 319Market Bubbles and Volatility 319Centralization 320Scams and Rip-offs 321Hardware Price Inflation and Scarcity 322Fire Hazards 323Neighbor Complaints 323Index 325

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