Mining Algorithm

A mathematical problem that is solved by participants of a blockchain to verify transactions in exchange for block rewards.

If you’re thinking of mining cryptocurrencies then you should know what a mining algorithm is -- because it will affect how much profit you make. 

When you mine a cryptocurrency what you are doing is telling your mining hardware to solve a mathematical algorithm. The first computer to solve that algorithm -- or “problem” -- will be rewarded with the amount of coins pre-set for solving that calculation. 

Different coins use different algorithms. Bitcoin, for example, uses SHA-256. To solve those problems you’ll need mining hardware that specifically works to solve SHA-256. But if you’re planning on mining Ethereum, then you’ll need hardware that solves for Ethash. 

Other coins use other algorithms -- Zhash, Beam, etc. So make sure the hardware you have or are planning to buy is able to solve for the coins you are planning to mine. 

Some hardware is more effective for certain algorithms. Bitcoin mining, for example, requires custom ASIC hardware that must be purchased and cannot be used for anything else but mining Bitcoin. Ethereum, however, can be mined by GPU’s from your computer. Therefore you could possibly use your computer (if it has a powerful enough GPU) to mine Ethereum when you’re not using your PC for other tasks. 

Also be sure to check the power consumption of your hardware. Compare it to the power of the hardware. This will help you determine if the amount you spend on electricity is less than the amount you earn from the coin (and therefore make a profit).