Mining Basics

Intro

To fully appreciate the offering of Fuzzy Fellas, it's helpful to have a basic understanding of cryptocurrency mining using ASICs. Here we break down the essential components.

Proof of Work

Proof of Work is a system where specialized hardware is used to help secure a decentralized ledger or network, also known as a cryptocurrency. In a process known as “mining”, these machines all compete with one another to solve complicated math problems.

Winning machines are responsible for producing the next “block” on the chain, which contains data about all the transactions that happened since the prior block. They are also rewarded with some amount of the native coin on that network.

ASIC Machines

ASIC (Application-Specific Integrated Circuit) machines are the specialized hardware that is used in the mining process. These machines have an average lifespan of 5 to 7 years, and can last longer.

ASICs are tailored to execute one specific algorithm, generally equating to the ability to mine only one popular coin. An exception to this is Scrypt ASICs, which can "merge mine" both Dogecoin (DOGE) and Litecoin (LTC), thereby earning rewards in both cryptocurrencies.

Coins of Interest

The coins that align most with our interests are Bitcoin (BTC), Litecoin (LTC), and Dogecoin (DOGE). We are open to purchasing different types of ASICs in the future based on how the market evolves.

BTC is the most established cryptocurrency, and therefore carries the least amount of risk. LTC and DOGE, while being slightly riskier, have provided more valuable rewards in recent times and can be mined together.

Network Difficulty

The term "difficulty" refers to how challenging it is to mine a new block on a blockchain. As more miners join a network, the difficulty increases. Increased difficulty translates to lower rewards, necessitating a strategy that includes regularly purchasing additional ASIC machines to sustain mining activities over a long period.

Halving Events

Certain blockchains, like BTC and LTC, undergo a "halving" event, which cuts the mining rewards by 50%. While this may seem detrimental on the surface, historically these events often precede a price increase in the cryptocurrency, as it becomes more expensive to mine. This can offset and even exceed the reduced mining rewards.