MINING COINS
Mining Bitcoins means running the SHA256 double round hash verification process, the math that verifies each block in the chain. Complete a block, and you are rewarded with a portion of a coin. Essentially, your processing power is converted into coins. The main cost is the electricity burnt to run the hardware. To help take some of the randomness out of hitting the solutions to each block, it’s best to join a mining pool, where efforts and rewards are spread.
In the early days, an average PC could do the job—the blockchain was short and the math simpler. Fat chance now; you really need Application-Specific Integrated Circuits, or ASIC machines. These rigs pack the required mathematical power but are otherwise pared down to the minimum. Mining power is measured in hashes per second (the base operation of the cryptography). These days, this is expressed in trillions of hashes per second (TH/s). Probably more important is efficiency: watts per gigahash (W/GH). Powerful machines are not cheap—a 14TH/s box running at 0.1W/GH would set you back $2,750 or so. Older and smaller machines are much cheaper—$200 or so—but are horribly inefficient. Margins are tight, and the field of play very fluid. It’s a delicate balance between profit and loss, and only the latest and most efficient hardware has a chance to run profitably.
Still want to mine? If you’re serious, you’ll need an air-conditioned room, with substantial racks of the latest ASIC machines, and a friendly electricity company. Too much? You can run a box or two at home, or cobble together custom rigs using high-end graphics cards. You don’t have to own the hardware yourself; cloud mines rent out capacity. You pay so much per TH/s, and hope it’s less than the returns.
New cryptocurrencies are a gamble; modest hardware may return lots of coins, which the market may then decide are near worthless. Accusations of scams abound, and many clones of current blockchains are launched, and many flounder. Yes, you could hit a winner early and win big, but the mining world is pretty savvy now, and competition fierce. Or you could stick to one of the established coins, and find you’ve turned $500 of electricity into $300 of coins. It happens.