Getting started with CPU Mining
CPU mining means using the central processing unit on a computer to mine cryptocurrency. Cryptocurrency mining on computers originally started with bitcoin(BTC) mining in 2009 when it was lesser known. Though it is no longer profitable to mine bitcoin from a simple computer, and this will likely blow up your computer, there are a few lesser know coins which were created specifically to be ASIC resistant in order to be efficient for computer mining.
Understanding cryptocurrency mining
If you are new to cryptocurrency mining, let’s cover some basics before we move forward…
The word crypto is derived from the word ‘cryptography’ which is defined by Wikipedia, ‘The art of solving problems’.
This also known as ‘encryption’.
For a more in-depth explanation of how cryptocurrency mining works, check out this article on How cryptocurrency mining works?
Each cryptocurrency runs on a network (or blockchain) and each network uses different set of rules(algorithms) to verify transfers.
The job of the miner is to decrypt the algorithm and in the case of Bitcoin, the miners submit a maximum of guesses to solve the problem first.
This is called as Proof-of Work.
Proof of Work vs Proof of Stake
Unlike the proof-of-work system, the proof-of-stake system awards the cryptocoins based on the amount of coins owned by the miner which consequently require less computation power.
Wikipedia describes the different types of proof-of-stake algorithms.
Many believe proof-of-stake is the future of cryptocurrency mining.
The Guardian reported that in November 2017, the Bitcoin network consumed more power than the Republic of Ireland.
Why should you care?
Satoshi Nakamoto and a group of individuals created Bitcoin as a decentralized digital currency.
Greed would be used to motivate people to support the network.
However, over the years, more efficient as well as powerful mining machines called ASIC miners were created.
And the problem is the companies manufacturing the machines were also mining the coins thus centralizing Bitcoin.
Choosing which cryptocurrency to mine
The best place to start is by eliminating all the coins that you can not mine.
Which coins not to mine on CPU
Go the Bitmain Website and go through all the algorithms.
There are many popular cryptocurrencies such as Dogecoin and Litecoin which claim to be CPU mineable.
Just because you can, doesn’t mean you should.
However, the likelihood of you ever earning any cryptocoins from a simple computer is very unlikely.
Once you have found which coins not to mine, then you want to go to Coinmarketcap and filter out the non-mineable coins.
Cryptocurrencies which have failed to become ASIC resistant
- Litecoin (Script)
Smart Contracts and ERC20 tokens
ERC20 tokens are smartcontract templates and were made popular by ICOs.
You might also hear the word ‘premined’ in some instances, but don’t be fooled.
These tokens are powered by Ether gas and can not be mined.
In very simple terms, cryptocurrency algorithms or hashing algorithms determine how the coins are verified.
The more miners the increased mining difficulty.
Pro Tip: You want to look for CryptoNight Algorithm Coins
CPU Mining Cheat Sheet
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ASIC Resistant Coins
Ideally, you are looking for projects which are constantly releasing update and the founders are very vocal about being ASIC resistant.
Pro tip: Regular forks are usually a good example that the devs are taking on the ASIC war head on.
Check the vibe in the telegram group and ask the founders directly their thoughts on ASIC mining.
Several cryptocurrencies ASIC resistant but are open to GPUs (graphic processing unit)
If you are a gamer and already have the equipment, you are looking for are the coins that can not be mined on ASIC miners.
Possible but not profitable coins
- Dagger Hashimoto – Ethash Algorithm
I am going to use Ultranote (XUN) as an example as they do regular forks to ensure that their coins always remain ASIC and GPU resistant.
Also, their coins are available on several exchanges.
Disclaimer: I am not being paid or sponsored by Ultranote or any of its affiliate- I just think it’s the perfect project for this tutorial;)
What you will need
- Paper and pen to save your keys
- Laptop or computer
- An exchange to cashout your XUN
Create your wallet
Go to Ultranote.org
Click Wallet or Scroll down towards the wallets.
Save the file to your computer.
Extract the files from the Zip folder.
Then click on UltraNoteWallet as instructed in the Wiki.
If this does not work for you, like it didn’t for me, click on the folder called vcredistx64 first and it will install a Microsoft Visual Software ( I am using Windows).
You will get a brand new Ultranote wallet.
The next step is to encrypt your wallet by clicking on Settings=>Encrypt
Wait for the Green check in the lower left hand corner for your wallet to fully sync with the blockchain.
This may take a while so I would recommend signing up to a cryptocurrency exchange in the meantime to cash out your Ultranote (XUN).
Ultanote can be cashed in Bitcoin at TradeOgre.com.
The sign up process takes only a few minutes.
For safe measure, remember to activate Google Authenticator.
Begin Mining on your Laptop or Computer
Earning your first crypto
Once you have earned enough crypto satisfy the minimum required by the exchange, hit the send button
Is CPU mining profitable?
It is important to remember that investing in any cryptocurrency is a high risk investment which makes cryptocurrency mining even more high risk.
Advantages of CPU Mining
- CPU mining is good option to see if mining is for you before investing larger amounts of money.
- This method allows a person to understand how blockchains work.
- Anybody with a computer can mine.
- There are some coins which can be mined only on CPUs.
- Entering the market early.
Disadvantages of CPU Mining
- It may burn your processor. (not recommended on laptops for certain coins)
- Can easily become unprofitable as operational tend to be more than the coins received.
- Many of the block rewards are worth only a few cents.
- Some coins won’t become profitable until a few years.
The reason many people become rich with cryptocurrency mining is because they did it to support the network and MOST IMPORTANTLY held on to their coins.
If you are looking for a safer investment, consider simply buying cryptocurrencies and trading or holding them.
The right mindset
Many miners will say that cryptocurrency mining is about betting on the future value of cryptocurrency.
However, I believe that the best mindset is to simply support your favorite project and the same time learn how blockchain works.
Simply because it can take years before a cryptocurrency can become profitable and as there are so many cryptocurrencies, the odds of new cryptocoins succeeding are decreasing.
In other words, you are mining X con with hope that its value will increase in the future.
Biggest Mining Mistake
The biggest mistake you can do is count on forums or google to help you find coins.
Because by the time search engines have picked it up, it is usually to late
The shoe shine boy rule
Joe Kennedy famously became famously rich when he exited the stock market before the 1929 depression.
You know it’s time to sell them the shoe shine boy gives you stock tips.- Joe Kennedy
Because cryptocurrency is still in its early phases and has not reached the shoe-shine level yet.
This rule applies to cryptocurrency mining, because the less users the cheaper the mining cost and the less mining difficulty.
ASIC Mining has MORE risks
- ASIC mining companies control a majority of the mining power and can potentially, in very simple terms, reject single computers
- The more computing power, the higher the mining difficulty and the more energy required
- Small miners had to shut down their operations during the 2018 bear market because they could not mine other coins.
- Algorithm updates may cause an ASIC miner to become useless
ASIC resistant cryptocurrencies
Because of all these problems with Bitcoin, many people have been trying to create ASIC resistant cyptocurrencies.
Remember that no algorithm is 100% ASIC resistant and companies such as Bitmain have made it their mission to decrypt popular coins.
A fork is similar to a software update.
For example, 1984 Macintosh can not run the software of the IphoneX.
So some devs of the cryptocurrencies continuously update their algorithms to make to make the ASIC miners obsolete.
Give it a try!!!
And let me know how it worked out for you.
Many thanks to @nichopp from the Ultranote telegram group for answering my questions.
Keep me posted on your progress, 😉
Founder of Satoshi Library
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Disclaimer: I am not a financial advisor and the information provided does not replace professional advice. Cryptocurrency prices are highly volatile as well as evolving very quickly. This post may contain inaccuracies, so please do your own research before placing money in any website. Thanks!