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