Cryptocurrency is one of the most exciting technological innovations in many years. It has the potential to possibly revolutionize the world in much the same way that the smartphone or the personal computer once did. Above all, these digital tokens that can be used for buying and selling also make for great investments, with many coins rising in value to impressive levels. Here is all about cryptocurrency mining.
You might have to recalibrate your expectations if you think you are just going to become rich overnight by putting out your mining shingle. To do it correctly and profitably, mining takes a significant beginning investment that includes pricey computer equipment. This is especially true if you want to mine Bitcoin, which is by far and away from the most valuable cryptocurrency on the market.
What Is Cryptocurrency?
You might think that money is already digital, how you can buy products and services on the internet? But that money only changes hands thanks to a third party that makes it happen, such as a bank or a credit card company.
Without the involvement of those entities, you couldn’t take fiat money, which is a fancy term for the currency coined by a given country, and pay someone over the internet. Even a company like PayPal, which facilitates online payments, only does so by first taking a fee for their services. They also decide if and when the payment will go through, doing so by linking to your bank account. That adds another level of intermediary to the transaction. This is all about cryptocurrency mining.
Cryptocurrency is simply transferred from one party to the next, which is why it is called a peer-to-peer payment system. There is also no overseeing organization making these transactions happen, just computer nodes across a wide-ranging network. That’s why cryptocurrency is considered a decentralized entity.
But where do the coins come from, if they are not created by some organization or government the way that fiat currencies are? Well, that’s where the miners come into play.
Why to Mine?
There are usually three ways that you can gather Bitcoin and other cryptocurrencies. You can buy them off an exchange, you can be paid for some service rendered or goods sold, or you can mine them. However you manage to do it, you are essentially getting a hold of something that can be very valuable. This is all about cryptocurrency mining.
Many people who grabbed Bitcoin and the other cryptocurrencies which followed in their wake in their earliest stages became rich from the rise in prices. Some think that the coins have the potential to go even higher, especially if they become as widespread in society as their proponents think they can be. That is why mining the coins, which is essentially a reward, holds appeal over paying a steep price to buy them.
The Two Main Methods of Mining
You might think that setting up shop as a miner is a license to print money. But mining cryptocurrencies is extremely involved, and it requires you to pay money up front no matter how you choose to accomplish it. Here are the ways you can make it happen.
1. Mining on Your Own
To mine for cryptocurrency, you must own computer hardware, which is powered by expensive computer chips. To give yourself a chance to be the first miner to solve one of the problems given out to the network, you have to have extreme amounts of lightning-fast processing equipment. You can’t do it in your head or even on a laptop, at least if you ever want to grab some cryptocurrency for your efforts.
Mining is similar to a lottery. In order to give yourself a better chance to win, you buy a lot of tickets. The more power that your computer hardware can generate, the better the chance that you can possibly be the first to validate a cryptocurrency transaction.
It is a costly effort, and it is not something that you can usually do out of your own home, not unless you have ample space. The equipment is bulky and will overheat quickly without a properly cool environment. Many cryptocurrency miners rent or buy specialized spaces to maximize their efforts, which adds to the cost of the whole endeavor.
In addition, cryptocurrency also requires a lot of power to make all that equipment work. Be prepared to pay hefty electric bills as a result. As you can see, it all leads to a significant financial commitment without any possible way of knowing when or if you will ever see any profit from all of that.
2. Piggybacking on the Mining of Others
If all of this sounds like an involved process, it is. And even if you could afford the equipment and the power bills; you would still be going up against some pretty stiff competition in the form of the mining pools. By having many miners all working toward the same goal; the larger pools on the market dominate the cryptocurrency that is mined.
You can pay money to a company that will do everything for you. And allow you to reap the financial rewards. Rent their equipment and their computing power so that you have a legitimate shot at getting some cryptocurrency out of the deal.
Keep in mind the fluctuating prices of the coins, ideally getting involved right when the market is in an upswing. You’ll also need to decide if the costs you put up right at the beginning will include joining one of the large mining pools. That will increase your chances of cryptocurrency coming your way; but it doesn’t guarantee that the value of the return will ever match your investment.
While the different coins in the cryptocurrency market might diverge very subtly in terms of the technical process; by which the coins are mined, the basic setup is the same. You’ll be paying upfront to either buy what is necessary or rent it; along with paying for the mining expertise of others. And then you just have to sit back; and hope that what you get in return will make it worth your while.
By mining altcoins, which include all of the coins besides Bitcoin, you are changing the mathematics up a little bit. Since these coins aren’t as popular as Bitcoin; which means that there aren’t as many miners competing for coins, you have more of a fighting chance of coming out on top and getting some coins. And you also won’t have to pay quite as much upfront no matter the method you choose.
The only problem is that these coins aren’t nearly as valuable as Bitcoin. As a result, you might get more in terms of the number of coins that you successfully mine. But the value of those coins might not approach what even a few successfully-mined Bitcoin could fetch you on the market.
Mining Vs Buying
The bottom line is that it is not easy to be a cryptocurrency miner in this day and age. In the infancy of the coins, you could get away with less money for tools and the like because the competition for coins wasn’t as stiff. You could also get coins in your supply that were bound to shoot up in value, which means that you didn’t need to be successful with your mining efforts nearly as often to still turn a big profit.
That means that miners have flooded into the market from all corners.
If that cryptocurrency ball is too tough to catch, you can still get involved. And that is by simply picking out a coin exchange, buying or downloading a digital wallet for storage, and buying some coins on your own.
That still requires an investment. But it also means that you can ensure that you will end up with some coins in your possession.
The fact is that you most likely have very little chance of turning cryptocurrency mining into a well-paying occupation at this time in history. You might be able to receive a little bit of passive income over time. This is all about cryptocurrency mining. But the days of miners getting rich quickly are long since past unless you somehow stumble upon a coin that rises from nothing to the upper echelons in the market.