Cryptocurrency mining is the activity through which new cryptoactives are issued and confirm transactions in a blockchain network. How to do it depends on the algorithm used by the network to reach distributed consensus: Proof-of-Work (PoW), Proof-of-Stake, PoS or other. The Work Test is the most used system currently, it can be found in cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Monero, Zcash and others. The Participation Test is usually achieved in combination with PoW in cryptoactives such as Decred, Dash or NEM and exclusively in Stratis or Lisk.
PROOF OF WORK (PROOF-OF-WORK)
In the Work Test System (PoW), the miners use computers with powerful processors (commercial or specialized) to solve hash riddles that, once solved, allow them to propose the next block of transactions to add in the chain of blocks and collect the reward for it, valued in cryptocurrencies.
The rewards for mining are composed of issuance of new currencies plus commissions for transactions included in the block and vary according to the monetary system of the network in which it works.
For example, Bitcoin started with a reward of 50 new BTC per block every 10 minutes, approximately. Currently the reward of that network is at 12.5 BTC and will be reduced by half in the years to come. The same happens in Ethereum, where the network rewarded the miners with 5 ETH initially and currently does it with 3 ETH.
In the mining activity chips of computer processors (CPU), video cards (GPU), programmable chips (FPGA) and, in some blockchains, specialized chips ASIC (of English, Integrated Circuits of Specific Application) are used. The chip to be used depends on both the cryptocurrency algorithm and the current processing power of the entire blockchain network, which translates into the difficulty of mining, a variable that determines the complexity of the hash puzzle to be solved. Blockchains like Bitcoin, Litecoin or Dash are mined with ASIC equipment, in others like Ethereum or Zcash computers with several video cards are used (here an article on how to configure this type of equipment) and some like Monero or Bytecoin are mined with CPU.
Except for those cases strictly excluding by algorithm, any cryptocurrency can be mined with any type of processor, for example, Bitcoin can be mined with CPU, FPGA or GPU, but only the most powerful processor compatible in that network will generate dividends.
In addition to the equipment, it is necessary to use software that allows interaction with the cryptocurrency network to obtain from the nodes the works of the blocks to be consolidated and to be able to send the solutions and attempts that are made (work tests).
The software to be used varies widely and can be either closed or open code. In ASIC miners, the software comes pre-installed and can only be configured and updated. Computer miners are much more versatile, since they not only allow the owner to install the mining application they want, but also enable the installation of multiple softwares to mine various cryptoactives at the same time. For example, the Claymore miner can be installed to mine in Ethereum or Zcash with the video cards, along with a software to mine Monero with the CPU and a complete SIA node to sell storage. Such configurations, however, require high performance components and good cooling to prevent premature damage.
Miners, be they common computers or ASICs, are powered by a power source of generally 600 to 2,000 watts, preferably in two-phase connection to better balance the load and increase electrical efficiency. They also require a stable and constant internet connection, but not necessarily a lot of bandwidth.
PROOF OF PARTICIPATION (PROOF-OF-STAKE)
The Participation Test (PoS) is an alternative consensus algorithm to the PoW in which the participants (nodes) send a special transaction that blocks their funds for a certain period of time and allows them to enter the process of creation and validation of blocks . Depending on the type of algorithm, the network randomly defines the participant who can propose the next block to be added to the chain or the participant in each round of a longer decision process in which the other participants of the network vote for the block which they consider should be added and the winner is finally added to the chain of blocks, thus reaching consensus.