Cryptocurrency mining is the process of validating transactions on the blockchain and involves solving mathematical equations and getting rewarded for your work. Different virtual coins have different degrees of complexity in solving mathematical functions. This defines which devices are suitable for use in mining the specific coins.
In this post, we shall discuss three hardware types in cryptocurrency mining operations plus popular hash algorithms used in Bitcoin and Ethereum blockchains.
Cryptocurrency mining using the computer’s Central Processing Unit (CPU)
Shockingly, in its first few days after birth, Bitcoin could be mined using standard personal computers. However, the complexity of mining Bitcoin and other major cryptos has increased rendering the processing power of personal computers insufficient. However, a small list of coins such as Monero still accommodates CPU mining.
Cryptocurrency mining using Graphics Processing Units (GPUs)
GPUs are a part of a computer system that handles display functions by managing the rendering process of graphics. GPUs are vital in computer systems that use heavy video editing tools or its users are heavy gamers. They are also needed in computers used in creating animations.
Using a graphics processing system takes the workload away from the computer’s main processor and ensures a smooth running of the system.
So, how does a graphics processor fit into the cryptocurrency mining field?
Generally, GPUs are efficient in display functions because they have a higher processing speed than normal computer CPUs. Additionally, GPUs are designed to perform repetitive and almost predictable functions.
The high processing speeds and the design make them suitable for cryptocurrency mining which requires the speed and specially designed hardware to perform the same kind of functions repetitively. The Arithmetic Logic Units employed by GPUs can handle more mathematical calculations.
However, not all cryptocurrency mining activities can be handled by GPUs. Others need more power to be able to solve complex mathematical computations.
Cryptocurrency mining using Application Specific Integrated Circuits (ASICs)
ASICs are the industry leading hardware equipment used in cryptocurrency mining activities. ASICs are hardware devices (think of it as a small computer) designed to interact with specific processes.
These devices are used to mine major coins since they have a higher processing speed than GPUs. ASICs are designed to interact with a single hash algorithm (more on hash algorithms later). When mining coins with different hash algorithms, you will need to purchase a separate ASIC device for each coin.
With the current cryptocurrency mining activities, devices with a high processing speed, such as ASICs, are needed to break the complex mathematical functions and make a profit at that. Slow cryptocurrency mining devices translate to losses since they cannot validate transactions on the blockchain as fast as they should. Even with their slow nature they still consume electrical power.
Such high-speed powered devices are only left to those who can afford them, whether as a company or as a mining pool. This brings the issue of centralization because the higher the speed your device has the higher your chances of validating more transactions and the higher your reward.
Even with the power of ASICs, there are cryptocurrencies that cannot be mined because they are generally ASIC resistant. These coins use a different or even a not so popular hash algorithm and a different consensus algorithm. Generally, ASICs are efficient in blockchain platforms that have implemented a Proof-of-Work Algorithm and an SHA-256 hash algorithm
Hash algorithms used in Bitcoin and Ethereum blockchains
Hash algorithms have the same usage whether in a blockchain context or outside. i.e they are used as a digital signature and authentication purposes.
SHA-256 Bitcoin hash algorithm
The most common hash algorithm is the SHA-256 algorithm. The Secure Hash Algorithm (SHA-256) generates a 32-byte unique signature for any text string. With this algorithm, any input will have a 256-bit output. A blockchain employing the SHA-256 algorithm will need up to ten minutes before a transaction is validated and added on the chain. This algorithm is used by cryptocurrencies such as Devcoin, Bitcoin Cash, and Bitcoin. ASICs are built around this algorithm.
SHA3 Ethereum hash algorithm
The SHA-3 (Secure Hash Algorithm 3) is another version of Bitcoin’s SHA-256 hash algorithm. The algorithm is resistant to ASIC devices. In a broader perspective, the SHA-3 uses a ‘sponge’ to absorb data which is then ‘squeezed’ out.
Examples of other hash algorithms used in blockchain include Scrypt Algorithm used by Litecoin, Dogecoin, etc. Scrypt is simpler than the SHA-256. The X11 algorithm used by Dash Coin, and the Cryptonight algorithm used by Monero.
Cryptocurrency mining has evolved and more applications specific devices are being manufactured to cater to different hash algorithms.