With the recent surge in Dogecoin's popularity, many people are looking for alternative ways to accumulate the token other than by just buying or selling it. Given it is a slightly easier cryptocurrency to mine than some of its pairs, users are focusing on mining as a way of getting their hands on more DOGE.
The process of adding blocks to the chain is called mining and is done by miners. These are simply hardware devices (or computers) that compete to solve a mathematical puzzle. Once that puzzle is solved, the miner adds a block to the chain and is rewarded for the energy expended in the process. Miners are an integral part of blockchains in that they determine which transactions get included along with maintaining the security of the network. Bitcoin also uses this type of mining, which is called proof of work.
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Dogecoin uses a mining algorithm called Scrypt, which is a different algorithm than the one used by Bitcoin. Scrypt is less energy-intensive than the Bitcoin algorithm, which allows DOGE to be mined by personal laptops and slightly upgraded hardware devices. Litecoin also uses the same algorithm, which means users can simultaneously mine both cryptocurrencies.
For users that don't want to or cannot install their own mining rigs, cloud mining is an interesting option. Essentially, you subscribe to a data center that mines for you. The company mines DOGE, pays you the mining rewards and charges you a monthly or yearly fee for doing so. There are several companies that offer these services, the most popular being NiceHash.
It's important to keep in mind that there is a fair amount of risk when cloud mining since you are trusting that a third-party data center's policies are in order. You are also adding to the centralisation of the protocol by using a cloud miner. As always, do your own research and figure out the best option for you.
Due to the recent price surge, Dogecoin mining can be quite profitable. Miners receive 10,000 DOGE tokens per block mined, which can add up over time, especially if the hype continues. However, it's important to remember that individual miners will have different profit margins and costs than pool miners or cloud miners.
For those that buy and install their own mining equipment, there are other costs to consider. GPU devices can start at US$350 and go up from there. ASIC miners are extremely popular for Bitcoin mining and are in high demand. These can cost users thousands of dollars and, with current supply chain constraints, are hard to come by. 2ff7e9595c