Cryptocurrency Mining For Dummies – FULL Explanation | EIP-1559, ETH2.0

hey everyone welcome back to another mining 
chamber video in today's video we are going   to be talking about cryptocurrency mining in 
detail so we're giving you an overview on it   and how does it work different type of mining 
rigs and what impacts your mining profits as   well as giving you my opinion on the eighth 2.0 
as well as the EIP-1599 so there will be a lot   of information in this video I hope you guys 
enjoy it and you get something useful out of it in this video i do have a lot to talk 
about and explain but the first thing i   should cover is cryptocurrencies if you are 
new to mining i would assume you're fairly   new to the crypto world in general and came 
across of it once the prices skyrocketed in   the recent months as of january 2021 so let 
me briefly run down what cryptocurrency is   cryptocurrency is a digital asset just like your 
dollars except that it runs fully digital it   does not have a bank or any central entity that 
controls it hence why it's called decentralized   and that is one of the main pros of cryptocurrency 
there are many cryptocurrencies that are newly   released but generally as a miner we only focus 
on the profitable ones i will touch more on that   later on with cryptocurrency your money is your 
own you keep your cryptos in a wallet that is made   of a public and a private key imagine your public 
key to be your email address and your private key   is your password to receive or send money you 
will be using the public address now that means   if you lose your money or send it to the wrong 
address you don't have a way back as for anonymity   cryptocurrency is fairly anonymous but not hard to 
track down the source of the transaction and the   receiver there are some cryptocurrencies intended 
for further privacy and such but to achieve nearly   as full anonymity as possible you will definitely 
need to do more work from burner phones to bitcoin   atms one of the main things that you should know 
is how to buy cryptocurrency and how to sell your   cryptocurrency there are different regulations for 
every country but i have made a video on both of   these topics as well as on different wallets and 
exchanges you will have the link of these three   different videos in the descriptions below that 
will help you understand that part thoroughly i   do recommend watching these videos after this one 
and i do hope this two sense of an explanation was   sufficient for some background information 
now let's talk about cryptocurrency mining   cryptocurrency mining is the process of validating 
transactions and minting new coins from block   i will further explain what blocks are and 
how they work but first let's talk about   the two different ways to mine one is proof of 
work and the other is proof of stake proof of   work is what all the different mining hardware 
falls under such as gpu rigs a6 fpgas etc the   mining hardware solves randomly generated complex 
puzzles using electricity and computational power   and then you'll get compensated once you find 
the right solution while proof of stake is in   a way being a shareholder so it's owning 
a certain number of certain cryptocurrency   to then be able to launch a node and that will be 
validating transactions and minting new coins out   of the blocks usually these nodes need a minimum 
number of coins to create one in some scenarios   your coins are locked out and you can't move them 
around but there's also soft staking which is more   flexible fpc needs to be on 24 7 to keep your node 
online but it can be any pc as long as it's up 24   7 with a stable internet connection there is more 
to staking than what we've mentioned here but i   feel like it would need its own video to be fully 
covered so now let's get back to the main focus of   the majority of miners and newcomers that come 
to this channel for and that is proof of work   proof of work has much more to it there are many 
different algorithms that cryptocurrencies fall   under algorithms are basically different arenas of 
puzzles so some mining hardware can excel better   at certain coins with certain algorithms more 
than other coins the measurement for your mining   power is your hash rate the hash is considered 
the solution attempt to the puzzle so if your   hash rate is 30 mega hash then you're doing 30 
million solution attempts a second there is a   lot more complexity to it regarding to solving 
the block and such but i don't want to get too   technical in this video i just want you to 
have an idea but i will leave a link in the   descriptions below for an article that explains it 
really well now like i mentioned before there are   different types of mining rigs so let's go ahead 
and go through these different types of rigs and   explain them briefly first we have the a6 a6 are 
known as application specific integrated circuits   and they are mostly used to mine certain coins 
with a high output of computational power as   well as a high electric consumption now by mining 
a specific coin i mean that if you buy for example   an s19 it provides a computational power of 110 
terahash and consumes 3 250 watts but it can only   mine coins that use the shot 256 algorithm such as 
bitcoin with such immense hash rate your profits   will still seem low due to the network difficulty 
which we will explain later on in the section for   what impacts your mining profits and then the 
second type of mining rates we have the fpgas   fpgas are basically what's in between the a6 and 
the gpu miners so they're made for a handful of   algorithms they can't mine every coin but some of 
them can and they're very similar to gpus but they   are more efficient and more profitable to some 
extent but they can also get very very expensive   i myself have no experience at all with any 
fpgas so one day we will probably do a video   covering them in detail and then the third 
thing we have are the gpu miners and that's   what this channel is primarily about so in gpu 
mining use graphic cards to be able to get more   computational power so the more and better gpus 
that you have the more mining power you have   and this option is the most residential friendly 
because asic miners do produce a lot of heat   and noise while fpga miners are very similar to 
gpu miners so these two options are residential   friendly in a way i have recently released a 
full buying guide for gpu mining rigs the link   will be in the descriptions below and we also had 
a giveaway in that video and the winners of that   giveaway will be selected in this video and there 
are different type of mining such as usb mining   cpu mining as well as storage mining where you can 
mine with your hard drive but all of these would   probably require their own individual video since 
there is a lot of information to cover on them so   hopefully in the near future i will have a video 
on every type of mining rig so that you can get   more information regarding to these topics now 
that we wrapped up the different type of mining   rigs we can go ahead and move on to the different 
type of mining services so as for mining services   what i mean by that is cloud mining hosting as 
well as gpu rental or buying pre-built rigs so   i'm just going to give you my opinion on them this 
is not a financial advice but it's just my opinion   on these platforms and maybe you can benefit from 
it so the first thing i want to start off with is   cloud mining cloud mining to the most part it's 
usually unreliable there are many scenarios that   people get handed the bad end of a stick in cloud 
mining since your money is going to a third-party   services that should be giving you hash power 
in return but you never know when these services   will close on you or leave there's a lot of ones 
that are scammy so they would take your money and   promise you a certain return such as 10 a month 
or such but then you'll never get your money back   you're probably going to be asked to pay more to 
be able to withdraw your funds and then you'll   never be able to withdraw them either way whether 
you pay or not so just be careful with these   services for cloud mining most of them are scams 
i honestly wouldn't use a service for cloud mining   it's better to just build your own rig and then 
there's also hosting hosting can be useful if your   electricity is very expensive so for example i've 
seen a lot of comments from germany and they're   all talk about how expensive the electricity is 
which is insane it's about 25 cents and above   so in that case mining cryptocurrency can be a 
little bit tough for you if you have to pay the   electricity bill it can get really hefty so what 
you'll need to look for is somebody credible or   somebody that you trust that can host for you 
and what that means is that you'll basically   have your rigs run at someone's else's place so 
if you know somebody for example in us or canada   and they have a fairly decent electric price you 
can have your rig built there by the person or   ship them the rig whichever way is comfortable 
for you and then from there you'll have your   rig running there by covering your own electricity 
costs as well as giving the person that's hosting   it for you a little bit of commission now as for 
what services can you use for hosting i honestly   don't know myself there aren't many out there 
but i would just look around and try to find a   friend or family member that you can trust because 
that is much more reliable than putting your rigs   with somebody else that you don't know and 
then the last thing is buying pre-built rigs   so sometimes people would want to buy just a rig 
that's pre-built and ready to go plug and play   just to save money and to avoid the hassle of 
having to build it yourself but honestly my   tip to you is to figure out how to do it yourself 
because you will be in such a hard time later on   if you get one that's pre-built let's imagine that 
you did buy a pre-built rig and then eventually   you run across an issue or instability problems 
and your rig starts acting up if you don't know   how it's built and you don't know how it works you 
will be investing a lot more time trying to figure   out what the problem is some pre-built rigs that 
you can buy off of people might offer you support   or service but still i honestly recommend you 
to avoid that but if you're a big investor and   you're looking to build out a big farm then maybe 
you can look into hiring a person or two to do it   for you and then that will be a better option now 
that wraps up the types of mining services if you   have any questions let me know in the comments 
below these are all just my opinions nothing is   for sure but i'm just letting you know through 
my experience and through seeing other people's   experiences so now let's get to the important 
parts what impacts your mining profits what makes   you make more money what makes you lose money and 
all that stuff the first thing about your mining   profits is knowing what crypto coin you should 
mine now depending on what you're using whether   it's asics fpgas or gpus you'll have a different 
coin of your own to pick and mine but for this   video we are going to focus on gpu mining since 
this is the primary category for this channel   so to know what cryptocurrency you should be 
mining with your gpus that depends on what gpu   you have so there is this thing called the dag 
file the dac file is basically a data set that's   stored on the vrams of the gpu and these data sets 
size increases over time so that means some gpus   for example the four gigabyte cards can't mine 
ethereum anymore because the dac size is larger   than four gigabytes even though you can still do 
them with zombie mode on but your hash rate will   be drastically lower so that's the importance 
of the dag file that's why it's recommended to   buy gpus with six gigabyte vram or more to mine 
ethereum ethereum is the most profitable coin for   all gpu miners at the time of this upload but then 
as a lot of you guys know ethereum will be moving   to proof of stake and they were also going to be 
eliminating the mining fees that us miners get   paid but before i give you my opinion on that 
news let me first explain to you what impacts   your profits so you understand why it's a big deal 
so the way that your profits increase or decrease   depends on three different factors to whichever 
coin you're mining to explain the three factors i   will be using ethereum as an example so now let's 
go back to the block from earlier the block is   what gets mined by your hardware and that block 
has a base reward of two ethereum so let's say   10 people with equal power in a mining pool end up 
mining that block and finding the right solution   that means that two ethereum will be divided 
equally between all of them since they have the   same amount of power but if you're a solo miner 
and you got lucky and then you solve the block   all the incentives will come to you directly so 
the two ethereum will be only yours but then with   solar mining your chances are much lower because 
the more hash rate you have the higher chances for   you to solve a block is and comparing your hashtag 
to a mining pool then that would leave you at a   very slim chances to be able to solve the block in 
some scenarios solo mining can be good but in most   scenarios pool mining is the way to go for stable 
incentives so now that the base reward of a block   is to ethereum you also need to add to it all the 
transaction fees that are within that block so   let's say i would send ethereum to someone i would 
pay a small fee for that transaction to go there   that fee goes to the miner so now let's say 
there is 10 000 transactions that happened or   10 million all these small fees would end up being 
in this block which increases their block reward   so that two ethereum base reward will be there 
that's the two ethereums that are going to be   introduced to the network so these are the 
coins that are actually mined the new coins   and then there's the transaction fees these 
transaction fees will just increase the block   reward and then it's the same concept everybody 
that solved it with the amount of power that   they have they will get the incentives according 
to how much effort they put into that block so   sometimes you can see blocks with 3 ethereum 
5 ethereum 10 ethereum it all depends on the   volume in the network so the more transactions 
going on in the network the more you get paid   but generally we don't see high numbers that much 
usually it's around three ethereum for ethereum   for a block reward and that itself is really good 
now there's also one more thing that affects block   rewards and that's having halfing doesn't happen 
on ethereum but it's basically what cuts down   the base block reward by half so this happens 
on bitcoin every four years every four years   bitcoin will cut its block reward by half which 
makes mining the rest of the coin harder which in   return increases scarcity and that's usually good 
for the price now speaking about price that is one   of the important factors for your profitability 
so if ethereum's price goes up your profitability   of mining ethereum goes up as well and that 
works for every other coin because when you're   mining you're getting paid with that ethereum 
so if you're getting paid for example point   a month and ethereum is at a thousand dollars then 
you're getting paid a hundred dollars a month for   mining but then if ethereum drops its price to 
five hundred dollars and you're still getting paid   0.1 ethereum a month then you're only going 
to be getting 50 the price can't be taken   for granted because it all depends on when 
you decide to cash it out so for example if   you're mining ethereum throughout the month and 
throughout the month the price of ethereum was   high above a thousand dollars but then the day 
that you want to cash it out ethereum price drops   that means the price really didn't have any 
effect there other than taking your profits down   because the price went down the moment you wanted 
to take your money out that's why you need to be   careful with selling your cryptocurrency 
and finding the right time to sell them   now the last thing that impacts your profitability 
that is the difficulty of the network   and to explain that the best way possible i feel 
like it's best to use a metaphor so let's think of   the block reward as a little snack bar that you 
have and you also have your friends around and   since you're a generous person you're going to 
share it with them so you would generally share   this between all your friends equally and they 
all get a share of that candy bar but now let's   say you have another candy bar and then you have 
more friends came over so you'd want to share that   same candy bar through more people so you'd have 
to break it into smaller pieces that goes the same   way to the block reward so when more miners come 
to the network the difficulty increases because   the total hash rate increases that means everybody 
that's eating from the same plate will have just a   smaller portion and in some scenarios difficulty 
would decrease when the price of ethereum goes   down and in those times you'd be mining more 
ethereum but the price of ethereum is lower   so your profits will look lower so that's what 
difficulty does it basically just changes how much   you get from mining and now adding that to the 
two other factors which are the transaction fees   and the price of the cryptocurrency that gives us 
the three factors that impact your mining profits   i hope it was all clear to understand if you guys 
have any further questions let me know in the   comments below now before i talk about ethereum 
2.0 and what's happening with the miner fees being   taken off with the new eip implementation 
let's first select our giveaway winners congratulations to all the winners thank you guys 
so much for participating in the giveaway a lot   of you guys gave great feedback on that last video 
and i really appreciate it i also decided to join   the giveaway by giving away 11 random winners 10 
worth of ethereum so if you found a random deposit   of 10 dollars of ethereum in your wallet then 
know that you won the giveaway thank you so much   for everyone that participated in the giveaway 
and also thank you for all the sponsors of the   giveaway please make sure to check them out guys 
all the links will be in the descriptions below   to claim your reward all you need to do is just 
email me a screenshot of your youtube account   and make sure that the email is coming from that 
same address that's showing on the screenshot   and then after that i can go ahead and talk to the 
different sponsors and get the reward coming to   your way and we will be doing a giveaway every 
10 000 subscribers so another giveaway will be   coming up very soon stay tuned for that so now 
that we got the giveaway out of the way we can   go ahead and talk about eip 1599 as well as 
ethereum 2.0 and whether gpu mining will be   viable for a long time so eip1599 will cut out all 
the transaction fees that are added to the block   so if you remember before we talked about 
the block and how there's a base reward   of two ethereum and then all these transaction 
fees will add up and increase the block reward   now if that gets cut off then we know that we'll 
always be getting only two ethereum per block   so we'll never see three ethereum five ethereum 
and all these additional profits that we usually   see when the transactions are getting really 
high that does suck it is a bad hit for gpu   miners that are mining ethereum which is the 
majority of gpu miners so what we can expect is   that our profitability will drop with at least 
30 percent since the average of a block reward   is three ethereum so what you can do is you can 
go to whattomind.com and you can go in details   with a mining calculator where you can set your 
own block size and after that if you put in your   hash rate and everything like this you will see 
your profitability after the eip implementation   and to do that all you need to do is just put 
to ethereum as for the block reward and that way   you can know what to expect when that time comes 
the reason that they are looking to implement the   aip 1599 and burn the transaction fees instead 
of giving them to miners is because they think   it's better for the ethereum price and that it 
would be better against inflation like that by   reducing the amount of ethereum that's circulating 
but at the same time bit speed tripping points out   really good points regarding this topic and 
shows his opinion on the price action that   it won't be impacted as much by them burning the 
fees instead of giving them to the miners who are   securing the network so i do recommend checking 
out bitspeed's tripping video on this topic he   does explain it really well so i'll leave the link 
for it in the descriptions below and what also you   can do is there's a twitter poll where you can 
vote whether you're against or with the eip 1599   so i recommend going ahead and voting against it 
so maybe that they will not implement it later on   it is worth trying so i don't see why not and now 
the last thing i want to talk about is ethereum   2.0 it is mentioned that it will be going to 
proof-of-stake instead of proof-of-work so   before we mention that proof-of-stake is you hold 
some cryptocurrency like you're a shareholder and   then from there based on how much you own you'll 
be able to validate transactions and get paid   although the revenue from proof-of-stake is not as 
much as mining at all but either way once ethereum   reaches that point i do still think there is 
going to be a long time until it reaches there   at least a year for us miners to be able to 
mine with gpus or even more i get a lot of   questions about it honestly like i said i don't 
know what will happen in the future we just know   that there's a possibility of ethereum moving 
out of proof of work and then we also have the   possibility of losing the transaction fees so 
we will have two things that we need to worry   about but if your electricity prices are fairly 
good and ethereum remains at this price right now   which is above a thousand dollars then the profits 
will remain decent until it moves fully to proof   of stake and that can take one to three years so 
that will be it for the video guys in this video   we talked about a lot of different topics and 
we didn't really dive into details about them   so what i want to do is i want to make a list 
of videos that i will go more into details about   and one of them will be the mining pools and 
how they work and then also solo mining versus   pool mining and how to use different mining 
softwares and every type of mining rig explained   in details and if you guys also want me to make a 
video diving into details about gpu mining after   ethereum 2.0 please let me know i will go ahead 
and do that as well i hope you guys enjoyed this   video and i hope you found value in it thank you 
so much for watching and if you have any questions   or any feedback leave it in the comments below and 
make sure to hit that thumbs up if you enjoyed it   and subscribe if you're new to the community thank 
you again and i hope you have a wonderful day you

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