Crypto Mining Rig and Hash Rate: Know Your Crypto
Do you know your crypto mining rig from your hash rate? Don't worry, this article will explain some crucial cryptocurrency mining terms you should know.
It's perhaps an oversimplified definition, but using power-intensive computer systems to create Bitcoin and verify transactions on the blockchain is a concept known as cryptocurrency mining.
As these mining operations become outlawed in certain countries, others are embracing the activity. Either way, cryptocurrency mining is a concept that every digital investor should at least understand to an extent. This article helps you achieve that.
A closer look reveals that cryptocurrency mining is a competition or race of sorts between miners. These miners build "rigs" from computer hardware that perform mathematical calculations for the cryptocurrency network to confirm transactions and increase security. The miners who are successful at solving these math problems first are rewarded with a new amount of cryptocurrency and they can also collect transaction fees for the transactions they confirm.
The most common terms associated with cryptocurrency mining activities are listed below:
Crypto Mining Rig
A crypto mining rig is a collection of physical hardware components assembled to perform the computational processes of the mining operations. Core component(s) include:
Central Processing Unit (CPU) – Once a crucial component for solving the complex calculations required in crypto-mining, the evolution of mining has made the CPU essentially a thing of the past.
Graphical Processing Unit (GPU) – In charge of the digital rendering in a mining system and much more useful in mining than the old CPU because of their speed and efficiency.
Field Programmable Gate Array (FPGA) - Unlike other architectures, FPGAs have the versatility of being programmable, giving miners the flexibility to alter their programming to improve their functionality.
Application-Specific Integrated Circuit (ASIC) – A hardware component designed exclusively for cryptocurrency mining, whereas CPUs and GPUs have other purposes in many industries. ASIC is expensive and very complex, but more efficient at mining.
Cryptocurrency miners are tasked with producing a 64-digit hexadecimal number called a hash. Hash rate is the term given to the calculating power of a device measured in hashes per second. Each hash rate is a created block that is tested against the network.
The hash rate is of utmost importance to crypto-miners because of the competition with "fellow" miners. Each miner wants their rig to be the first to generate a valid hash. To do so, their rigs need to solve those incredibly complex mathematical puzzles as rapidly as they can.
Cryptocurrencies evolved out of a desire to exchange currency without a financial “overseer” being involved - Better known as decentralisation. Proof-of-Work (PoW) makes this possible because it is one method of absolutely confirming cryptocurrency transactions. How? Proof-of-work adds a new block of transactions to a cryptocurrency's existing blockchain. Crypto miners compete to add these new blocks to the blockchain successfully, and the winner reaps the rewards of newly minted cryptocurrency and transaction fees.
Is Cryptocurrency Mining Legal?
Much about the cryptocurrency market, in general, remains unregulated; cryptocurrency mining is no exception. Therefore, its legality is mostly opaque to much of society, including the crypto-miners.
For the most part, crypto miners are considered money transmitters. That means that crypto-miners operate under the jurisdiction of the rules governing those kinds of transactions in whatever country the miner decides to build their rig(s). For example, cryptocurrency mining is considered a business in Israel. It is therefore subject to corporate income tax in that country. Despite cryptocurrency mining being around for over a decade, there is still a great deal of regulatory work to be done in most countries.
For now, geography seems to be the determining factor in the legality of mining. Russia and China have banned cryptocurrency mining, but the U.S. and Canada appear to be embracing mining efforts in their territories.
Not all cryptocurrency investors are encouraged to get into mining - it is not an easy way to make money, and it is a huge liability to the environment because of the inordinate amount of energy crypto rigs consume. Politically speaking, mining is expected to become a strategy of many countries which see a future in cryptocurrencies. Countries willingly putting up barriers to the widespread adoption of cryptocurrencies in their territory will be sabotaging their own innovation engine.
Author: Greyson Kelly
Greyson Kelly is a business writer living in Milwaukee, Wisconsin. He writes extensively on technological trends, cryptocurrency, and ‘cutting edge’ industry topics. He has an MBA in Business and has over a decade of experience in communications and public relations.