Monero (XMR) is a controversial privacy coin which — despite increasing regulatory pressure on exchanges — remains among the top 20 coins in the cryptocurrency industry. Currently, the cryptocurrency has a market capitalization of over $2 billion.
Notably, XMR developers are working hard to maintain and improve the network’s decentralization by keeping specialized machines such as application-specific integrated circuits (ASICs) away from the mining scene. As such, more people can fairly share the coin’s over 17 million total supply. Monero’s previous use of the CryptNight hashing algorithm was replaced in November 2019, when a scheduled upgrade introduced RandomX, which is a PoW algorithm that also discourages the development of ASICs. RandomX also began to penalize Monero miners that used GPUs, which means that CPU mining is now the best way to mine Monero.
What Is Monero Mining?
Monero mining is the process of verifying transactions on the cryptocurrency’s blockchain to earn rewards in the form of XMR coins. You should note that the cryptocurrency works similarly to Bitcoin, except that it is more bent on facilitating private transactions.
Mining XMR is when you create new coins on the decentralized platform via Monero mining software.
How XMR Mining Works
Unlike Bitcoin, which has a fixed supply of 21 million coins, the privacy-centric coin doesn’t have a similar hard cap. Instead, it is set up in a way that if the miners discover all the allocated 18.132 million tokens, then a “tail emission” will begin generating 0.6 XMR rewards infinitely, starting in May 2022. This keeps the miners motivated after depleting the total supply.
A new block on the decentralized platform is found approximately every two minutes, and the current block reward as of January 2021 is 1.26 XMR.
Things to Consider Before You Mine Monero
Mining is a business; therefore, the profitability of mining Monero should come into play before you even think of acquiring the necessary equipment. A key factor that adds to the profitability of XMR miners is that the process doesn’t require pricey heavy-duty gizmos like in Bitcoin. With even a simple CPU, or GPU, you are good to go.
In line with this, you should use an XMR mining profitability calculator to calculate if your devices’ hash power, power consumption, electricity cost, etc., allow you to make a profit.
Mining is a time-based competition. Therefore, the higher the device’s processing speed, the luckier and merrier the mining process would be. And as stated earlier, Monero uses the same consensus mechanism as Bitcoin, albeit with a different hashing algorithm.
To elaborate, BTC uses the SHA-256, while Monero uses RandomX The two hashing algorithms cause the difference in supported mining devices. Although ASIC manufacturers have made many attempts to take a stab at the privacy-focused cryptocurrency, the XRM team has managed to iterate anti-ASIC upgrades enough times to keep these devices at bay.
Why chase ASICs away? Due to their cost, only a select few can afford them, leading to the centralization of miners — hence, overriding the decentralization vision of the crypto community in the Monero developers’ eyes.
The hash rate is a measure of cryptocurrency mining devices’ speed. Simply put, it’s the number of hashes or calculations the device can process per second.
What Is a Monero Miner?
The term “Monero miner” can refer to either a physical miner operating mining devices or to programs installed to mine the privacy-centric coin, using CPUs since the RandomX upgrade.
Also, it can mean the Monero mining software we’ve discussed in the previous section. In this article, let’s use the first meaning in the list. To mine XMR, you need to turn your general mining hardware into a Monero mining rig.
Monero Mining Rig
As Monero now is pretty much exclusively mined with CPUs, you can either use your current CPU, or purchase a new CPU just for Monero mining.
Once you have decided on the CPU that you will use to mine Monero, you will need to download Monero software.
Monero Mining Hardware and Monero Mining Software
Monero mining software is an application that helps you connect your mining hardware with the coin’s blockchain or pool. Different CPUs support different mining software. Note that using non-compatible software means that CPUs would be roaring, but with no rewards.
Popular XRM mining software includes:
- XMRig NVIDIA CUDA
Popular XRM mining hardware includes:
- AMD Threadripper 3990X
- AMD Ryzen 9 3900X
- Intel Core i9-10900K
Please keep in mind that mining software and hardware is fast-moving industry, and that options may change over time.
Ways to Mine XMR
You can mine the privacy-centric coin in three ways:
- as a solo XMR miner;
- joining a Monero pool;
- using Monero cloud mining services.
A solo miner is a miner who directly interacts with the blockchain. A solo miner’s single most significant advantage is that the miner gets to keep all the block rewards. Unfortunately, solo miners may not be able to win rewards as frequently as mining pools do.
Another advantage of solo mining is that it can be done on your PC.
Monero Mining Pool
An XMR mining pool comprises individual rig owners who combine their rigs’ power to increase their chances of finding new blocks in the Monero blockchain. Block rewards go to those who contributed mining power towards finding a particular block.
Most XRM mining pools charge a fee between 0% and 2%. Some popular Monero mining pools are MineXMR, SupportXMR, Unipool and XMRNanopool. Apart from verifying transactions faster than going solo, joining an XMR mining pool means that the rewards are mostly stable.
However, using a Monero pool means that you’re responsible for maintaining the hardware, internet connection and paying electricity bills. Note that choosing a reputable pool is ideal because while you may be providing your hash power to a pool, a disreputable pool may fail to maintain its connection to the Monero blockchain.
Monero Cloud Mining
Monero cloud mining is the act of using cloud-hosted computing power to mine XMR. Often, cloud mining service providers operate data centers that host the computing devices.
Individuals pay a fee for using the processing power. Since the data center takes care of the heavy-lifting, those using the service don’t need to invest in mining hardware and rigs.
Monero cloud mining is considered financially viable if you’re not a solo miner or a fan of a mining pool. Reputable XMR cloud mining service providers include Minergate and CCGMining. One way to spot a shady cloud mining service provider is to look at the number of subscribers. Be cautious if the number is unusually low.
How to Mine Monero
Do we have everything we need to start mining XMR? Not yet. One thing is missing; a wallet address. Whether you are solo or pool mining, an address is of apt importance because it is where you can claim your rewards. You can either use a full node wallet or the one you use on your favorite cryptocurrency exchange, such as Binance and Coinbase.
Now that we have all the ingredients, it’s time to configure our mining software. Configuration involves using the mining software to connect the hardware to either a pool or directly tapping into the Monero blockchain.
The configuration process depends on the hardware used and the mode of mining. If the process is successful, it’s time to watch as those rewards start rolling in.
Here’s a recap of how to mine Monero:
- Choose your hardware;
- Select a mining software that supports your mining hardware;
- Determine the address you’ll use;
- Configure the mining software;
- Sit back and relax; XMR is on its way.
Monero Mining and Spyware
It is an unfortunate reality that Monero is highly sought-after by bad actors like hackers and scammers due to the anonymity its privacy features provide. Therefore, these same criminals choose not to mine XMR the legitimate way or buy it from exchanges, but instead, they infect internet users’ computers through malicious software (malware) embedded in emails or hacked websites. This malware in turn uses these compromised computers to surreptitiously mine Monero peer-to-peer without anyone knowing it.
It is estimated that 4% of all Monero is mined through so-called botnets, groups of thousands of compromised computers whose processing power is ramped up to mine cryptocurrency without the knowledge of their owners. It is estimated that over $57 million in XMR has been mined in the last four years in this manner (as of January 2019). Monero (and Bitcoin) is also the crypto of choice for ransomware hackers.
This is an untenable situation for authorities, as these funds are distributed to money launders, criminal gangs and terrorist organizations. The main reasons why regulators are taking action at cryptocurrency ownership are because they are mandated to ensure the protection of their jurisdictions’ residents and more importantly, that the Financial Action Task Force (FATF)’s global anti-money laundering (AML) and combating-terrorism funding (CFT) guidances are met.
Therefore, they cannot turn a blind eye to this illicit and AML/CFT violating behavior and have put pressure on exchanges to delist privacy coins like XMR. Many leading exchanges in Asia especially did so, in 2020.
This delisting is impacting the value of Monero, and it is advised to stay up to date with the legal aspects of mining Monero in 2021.
XMR mining is among the few profitable mining ventures that don’t break the bank to acquire the mining equipment. With your CPU or GPU and initiative, you’re all set. Furthermore, the option of cloud mining removes the hassle of building and maintaining a rig for those who want to do away with the technical stuff involved in mining Monero.
If the Monero price increases, so does the profit margin of mining, since less investment goes into the process than when mining Bitcoin. However, it’s crucial to keep your eyes open for scammers, especially with cloud mining as well as privacy coin regulations in your country.