List of Topics | Providence Bitcoin Investment Group | Meetup
Crypto Trading & Crypto Mining
For Those New to Cryptocurrencies and Blockchain Technology
Nickantony Quach & Alec Mustafayev
This booklet is under construction. Nickantony Quach is to write the first draft of every topic. Alec Mustafayev is to produce the second draft that sounds less technical and more social. Wanna pitch in? Contact either Nick or Alec via @Ri4CTV on Instagram.
- About This
- What is Currency?
- What is Cryptography?
- What is Cryptocurrency?
- What is a Broker-dealer?
- What is Crypto Trading?
- What is Crypto Mining?
- What is a Crypto Miner?
- CPU, GPU & ASIC Crypto Miners
- What is Hash Rate or Hash Power?
- What is a Hash Marketplace?
- Release Notes
Presented on this webpage is a booklet whose mission is, as its title implies, to explain both cryptocurrency trading and cryptocurrency mining to those who are new to cryptocurrencies. This booklet is produced for and maintained by members of the Providence Bitcoin Investment Group.
This webpage also acts as the first chapter in The Book of Crypto, which is hosted by this Thumoslang website.
What got our group started in the first place is Thumoslang, which is the nomenclature for social clairty. We use it to speed up communication during collaboration. All is explained by The Guide to Thumoslang, which is backed by The Dictionary of Thumoslang. In general, the mission of Thumoslang is to speed up the actualization of your ideals.
A currency is a system of monetary units (money) in common use, especially for people in a nation. For example, the United States dollar (USD) is the official currency of the United States. It is issued by the Federal Reserve System, which is the central banking system of the United States of America.
Business owners constantly make payments to contractors, suppliers, vendors, and employees. Wouldn’t it be nice to skip cash and checks? Instead of using paper to pay people, you can make EFT payments. EFT stands for electronic funds transfer. In business, you can send or receive EFT payments to streamline the payment process. Electronic funds transfers include all types of electronic payments.
Electronic funds transfer (EFT) is the electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of bank staff.
When you transfer money between banks – called an external transfer – there can be fees and it might take days. These transfers are processed through the Automated Clearing House electronic network, much like other ACH transfers such as bill payments and direct deposit.
In general, an automated clearing house (ACH) is a computer-based electronic network for processing transactions, usually domestic low value payments, between participating financial institutions.
ACH (Automated Clearing House) payment is a type of EFT. All ACH transactions are types of electronic funds transfers, but not all electronic funds transfers are ACH transactions. An ACH payment is made within the Automated Clearing House Network.
Wire transfers are not ACH transactions. Instead, a wire transfer is a type of EFT transaction.
An EFT transaction is processed by an EFT system. This process is directly paid for by either the bank, the user (you), or both.
In mathematics, a function is a binary relation between two sets that associates to each element of the first set exactly one element of the second set. Tell me more
A hash function is any function that can be used to map data of arbitrary size to fixed-size values. The values returned by a hash function are called hash values, hash codes, digests, or simply hashes. The values are usually used to index a fixed-size table called a hash table. Tell me more
A cryptographic hash function (CHF) is a mathematical algorithm that maps data of arbitrary size (the “message”) to a bit array of a fixed size (the “hash value”). It is a one-way function, that is, a function which is practically infeasible to invert. Ideally, the only way to find a message that produces a given hash is to attempt a brute-force search of possible inputs to see if they produce a match, or use a rainbow table of matched hashes. Cryptographic hash functions are a basic tool of modern cryptography. Tell me more
Cryptography is the practice and study of techniques for secure communication in the presence of third parties called adversaries. More generally, cryptography is about constructing and analyzing protocols that prevent third parties or the public from reading private messages; various aspects in information security such as data confidentiality, data integrity, authentication, and non-repudiation are central to modern cryptography. Tell me more
A cryptocurrency, or simply crypto is “a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of a computerized database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership.” | Tell me more
- When a cryptocurrency is minted or created prior to issuance or issued by a single issuer, it is generally considered centralized. Most Cryptocurrencies are actually Centralized; 3 coins leads the way: Ripple coins (XRP), NEO coins, and EOS.
- When implemented with decentralized control, each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database. The best two examples are bitcoins (BTC) and ethers (ETH).
An exchange is an entity that acts as a trusted third party so one can exchange their assets with someone else.
A broker is an intermediary between a market, which could be an exchange, and the traders or investors. Unlike the exchange, users do not possess the asset they are trading, and they do not exchange anything they own. For example, Robinhood Markets, Inc. is a FINRA-regulated broker-dealer.
In financial services, a broker-dealer is a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. When executing trade orders on behalf of a customer, the institution is said to be acting as a broker. When executing trades for its own account, the institution is said to be acting as a dealer. Securities bought from clients or other firms in the capacity of dealer may be sold to clients or other firms acting again in the capacity of dealer, or they may become a part of the firm’s holdings.
Through a broker or an exchange, you can buy, hold, and sell cryptocurrencies. Buying an amount of cryptocurrency low and selling it high is one, holding it long term is another, strategy in crypto trading. Neither is necessarily better than the other.
When you send money from your bank to mine, the transaction is carried out by the banking system. The processing of the transaction is directly paid for by the bank, the user (you), or both.
When you send me an amount of bitcoin, the transaction is carried out by the Bitcoin Network, which comprises basically many personal computers around the world. When you plug your PC into the Bitcoin Network, your electricity is used to carry out the transaction. For that, the network rewards you with a small amount of bitcoin.
In the above example, while you’re sleeping, your PC works for the Bitcoin Network and earns bitcoins for you. This operation is called bitcoin mining.
Other people may use their computers to mine ethers or other cryptocurrencies. These operations are referred to as crypto mining. Computers used for crypto mining are referred to as crypto miners.
The hash rate is the measuring unit of the processing power of a crypto network such as Bitcoin or Ethereum. The network must make intensive mathematical operations for security purposes. When the network reached a hash rate of 10 Th/s, it meant it could make 10 trillion calculations per second.
Crypto mining is the process of making computer hardware do mathematical calculations for a crypto network to confirm transactions and increase security. As a reward for their services, miners can collect transaction fees for the transactions they confirm, along with newly created crypto coins. Mining is a specialized and competitive market where the rewards are divided up according to how much calculation is done. Not all cryptocurrency users do crypto mining, and it is not an easy way to make money.
Crypto is short for cryptocurrency, which is the money not normally issued not by a central bank. Instead, the money is minted by a public network independent of governing bodies. Such a network is referred to as a crypto network.
You are mining a cryptocurrency when you plug your personal computer into its network. That is how you turn your PC into a crypto mining machine.
While doing crypto mining, your electricity is used by your crypto miner to carry out financial transactions on the network. For that, the network rewards you with a small amount of cryptocurrency which could be later traded for US dollars.
Convert your electricity into money using crypto miners
A personal computer (PC) is a multi-purpose computer whose size, capabilities, and price make it feasible for individual use. PCs are intended to be operated directly by an end user, rather than by a computer expert or technician.
When you use your personal computer, it carries out the required work by using either its Central Processing Unit (CPU) or its Graphics Processing Unit (GPU), which is a specialized electronic circuit designed to rapidly manipulate and alter memory to accelerate the creation of images in a frame buffer intended for output to a display device.
When you use your PC to do crypto mining, the PC uses either its CPU or its GPU to carry out crypto transactions. When your PC uses its CPU for crypto mining, it is said to be doing CPU mining. Alternatively, when it uses its GPU for crypto mining, it is said to be doing GPU mining.
Peripheral Component Interconnect (PCI) is a local computer bus for attaching hardware devices in a computer and is part of the PCI Local Bus standard. You can install as many GPU cards on the mother board as you have available PCI slots for them.
When you build a PC, you may have several CPU’s and several GPU’s as part of your hardware.
An application-specific integrated circuit (ASIC) is an integrated circuit (IC) chip customized for a particular use, rather than intended for general-purpose use. For example, a chip designed to run in a digital voice recorder or a high-efficiency bitcoin miner is an ASIC. Application-specific standard product (ASSP) chips are intermediate between ASICs and industry standard integrated circuits like the 7400 series or the 4000 series.
You may now consider three different classes of crypto miners: CPU miners, GPU miners, and ASIC miners.
An ASIC Miner is a piece of equipment that is purposely-built solely for mining. Unlike other types of mining devices, ASICs can only be used to mine cryptos and nothing else. Additionally, a single ASIC Miner can only be used to mine one type on cryptocurrency. For example, one miner would only work with Bitcoin, another would only work with Ethereum, and one may work for both Litecoin and Dogecoin, since the two are the same type of currency (as both run on the Scrypt algorithm).
The upside of ASIC Miners is that they are very simple to operate, and require no input aside from being plugged in, and, of course, their initial setup. Additionally, rather than making a Crypto Wallet manually to deposit your mined crypto into, each ASIC Miner comes with a Crypto Wallet included.
The upside of PC is that, unlike ASIC Miners, they can be used to mine different types of cryptocurrencies throughout their life cycle. Additionally, they are much more affordable.
The downside of ASIC Miners is that they are very expensive, and it often takes many months for the profit made from them to break even with the higher profit they bring in. Also, an ASIC Miner can only be used to mine one type of cryptocurrency. The most significant downside is that many of the places claiming to sell ASIC Miners are scams.
The downside of PC is that the profits it brings in tend to be much slimmer than those of ASIC Miners. Some people never end up breaking even with the price they spent on their PC Mining Rig. PCs also have trouble competing with ASIC Miners in being the first to finish mining a block and receiving a reward.
In the end, ASICs are best for mining Bitcoin, Litecoin, Dogecoin, Dash, and coins that are based off these algorithms, while PCs are best for mining Ethereum, Monero, Ravencoin, and coins based off those algorithms. This statement may not be absolutely true as time goes.
The hash power and hash rate are interchangeable terms used to describe the combined computational power of a specific cryptocurrency network or the power of an individual mining rig on that network. An individual mining rig is a set of crypto miners owned by a legal person, be it an individual human or a single organization.
The operation of any mineable cryptocurrency is maintained by its own network of miners: individuals and organizations that contribute the computational power of their mining rigs to process transactions and emit new coins. This is done by calculating cryptographic hashes – pseudorandom data strings that are used to prevent double spending and to ensure that new coins cannot be created out of thin air.
The hash rate of a mining rig is the number of hashes that it can calculate per second. The combined hash power of a cryptocurrency network is the sum of the hash rates of all mining rigs that are in operation at any given moment.
Different devices, such as CPUs, GPUs and ASICs have differing hash rates, depending on their sheer computational power, as well as how well-optimized they are for the specific task of processing a given hash function.
The hash rate of an individual device is a key metric for measuring the profitability of a mining setup as it determines the likelihood of finding a “good” hash that will produce a mining reward.
On the other hand, the overall hash rate of a cryptocurrency network is an indicator of that coin’s security: in order to hack the network for personal gain, the attackers need to overcome its total hash power – making the task nearly impossible at high enough hash rates.
Crypto miners are participants in the process that uses the hash power provided by their equipment to create a block and receive rewards. With increasing difficulty, work efficiency decreases, which forces them to look for additional ways to earn money. One of the solutions is to sell their hash power, ensuring diversification and reducing the risks of such activities.
Hashpower sellers are owners of crypto mining devices or rigs who do not want to do the mining themselves. Instead, they sell the mining power of their devices to hashpower buyers. Risk reduction, ease of earning, and guaranteed profitability are the main reasons why owners of crypto mining machines want to become hashpower sellers.
A buyer of hash power is a person who wants to buy the mining service from someone else. They can do that by renting mining rigs and/or committing to the cloud mining contracts. If you want to do crypto mining but you do not want to worry about the maintenance of your own mining machines, you should become a hashpower buyer.
A hash marketplace is a platform where hashpower sellers and buyers are brought together.
Revised at 1:00:26 AM on 4/26/2021 in Rhode Island, this document is updated regularly online and periodically updated in print. It’s part of, or in support of, the Thumoslang Book Collection. Use the following link for the latest version of this document
To offer feedback or comment on anything presented herein or to obtain Thumoslang mentoring or other services, please contact the Quach & Mustafayev Group directly.