The advent of cryptocurrencies has given mankind a new kind of income – mining. For several years now, it has been a very debated topic. Since the advent of cryptocurrencies, the mechanism of mining has changed dramatically. Previously, it was possible to start “mining” from a personal computer, but now it takes some effort to join the ranks of miners.
What you need in order to become a miner
The job of miners is to keep cryptocurrency networks running and to verify user transactions. To do this, you need to solve mathematical hash functions with the help of computing equipment. Therefore, in other words, mining can be described as the process of monetizing the computing power of the hardware.
Initially, cryptocurrency networks had much less complexity, so it was possible to run mining on any PC. But with the growing popularity of cryptocurrencies, the complexity has also increased, so now mining would require creating your own high-capacity mining farm, which involves capital investment. When it comes to mining cryptocurrencies like Bitcoin, it requires huge capacities and, accordingly, investments, but there are more than 1000 digital assets on the market, so you can start mining with small amounts.
If you choose mining as your main activity, it is not superfluous to get acquainted with the knowledge bases about blockchain technology and the subtleties of the cryptocurrency market. The articles in our “For Beginners” section on the top menu will help you.
The profitability and payback of a farm is directly related to the miner’s ability to control the mining process and provide optimal conditions for monetizing the capacity.
Tips for the novice miner
The cryptocurrency industry is just gaining momentum, so it’s hard to call it permanent and with clear rules. Choosing mining as an income, an investor should understand that this type of activity involves certain risks, so it is important to know how to properly maneuver the cryptocurrency market.
The main things a novice miner should know and undertake before starting to mine:
- The complexity of mining is always increasing. As the demand increases, the difficulty of mining top cryptocurrencies increases all the time. Experienced miners recommend assembling a mining farm with a reserve of power right away and allocating a portion of the income to upgrading and building up the capacity. It is necessary to monitor the situation on the market. The profitability of cryptocurrency mining depends on many factors, the main ones being the complexity of the network and the rate of cryptocurrencies. A miner cannot influence these factors, but can choose from a variety of coins only those that are profitable to mine and have prospects to increase in value. It is recommended to choose several digital assets that are in the top 10 by capitalization.
- Optimization of mining. For users, the process of mining comes down to connecting the equipment to mining via special software, but the profitability of the process also depends on how competently the miner can organize it. Here you should make detailed calculations based on the cost of equipment and electricity, take care of the optimal location of the farm and its protection from overheating and damage.
- Security. It is extremely important to take care of the safety of the money. To do this in advance you need to prepare reliable cryptocurrency wallets (we recommend Ledger Nano hardware wallet, which we successfully use for many years), choose programs and services for mining, having a good reputation and a high level of security.
What kind of mining to choose
- The choice of the type of mining, first of all, depends on the initial budget of the novice miner. There are several varieties that involve different investments of capital:
- Cloud mining. This option will suit those who want to get into the mining process, but are not yet ready to invest significantly financially. Mining in this case does not require effort and in-depth knowledge of the industry, and the initial investment is limited to a few hundred dollars.
- A mining farm made of video cards. Unlike the previous method, where the cloud mining service takes care of all the mining arrangements, here you will need to delve into the intricacies of making money, assemble the farm yourself and organize the coin mining, which requires additional study. The capital investment threshold in this case starts from 1000 dollars.
- Mining on asics. Asic devices are characterized by high performance and easy setup. This is a comprehensive ready to mine a specific cryptocurrency device, which only needs to be connected to the Internet and power. Special knowledge in the organization of the process in this case from the miner is not required, but mining on asics requires a large investment.
- Mining on CPUs. Currently, it is not relevant to use CPUs for mining top cryptocurrencies, but if they are available, you can pay attention to mining “newfangled” cryptocurrencies with growth prospects.
A starter kit to start mining
Modern mining requires high computing power, so one of the best options is to create a mining farm of several video cards. In favor of this method is the demand for equipment on the secondary market and the ability to mine cryptocurrencies working on different algorithms.
When the farm is ready for operation, you should choose a cryptocurrency for mining and select the appropriate software for it based on the choice. So, in addition to the computing equipment, the miner will also need to:
- choose a pool for mining;
- choose the appropriate software;
- to have a cryptocurrency wallet.
It should be noted that mining farms create a lot of noise and heat, so a novice miner should also take care of the location of his farm. Optimal options are to place it in a non-residential area, such as a spare room, garage or balcony.
How much can I earn
It takes a few hours to get the first coins, but the real earnings start when the equipment pays for itself. The payback period of the equipment depends on many factors:
- the cost of the equipment;
- Computing power of the equipment;
- the daily profitability of the farm;
- the value of the cryptocurrency;
- the cost of electricity and its costs;
- increase in the complexity of the cryptocurrency network.
To calculate the net profit, a miner needs to subtract electricity and equipment costs from the coins earned. The average payback of a farm varies between 9-12 months, and one should take into account the increasing/decreasing trends in the cost of coins and the increasing complexity of the network.
It is often the case that with a significant jump in the exchange rate, the investment in the equipment pays off much faster and the miner comes to a net profit in a few months. But it also happens that the complexity increases so much that mining becomes unprofitable, in which case the miner should either increase the capacity or switch to mining another asset.
You can calculate the profitability of mining through our cryptocurrency mining calculator. The calculator based on the total hash power calculates the daily, monthly and annual yield of the farm, taking into account the current value of the cryptocurrency and the approximate increase in complexity.
Advantages and disadvantages of mining as a form of income
- Passive income;
- does not require additional education and in-depth knowledge;
- profits from mining can increase manifold with the rapid growth of the value of the mined cryptocurrency;
- prospective and demanded type of activity;
- income from mining is not subject to taxation.
- Initial capital investment is required;
- It is recommended to learn the basics of mining before you start mining;
- The level of income depends directly on the miner’s ability to organize mining;
- there is a risk of going bankrupt if the exchange rate drops;
- the computing equipment wears out over time, so mining requires a constant increase in power;
- a miner needs to always be in touch with the market news, to be able to determine the prospects of mining certain cryptocurrencies.
Despite its apparent simplicity, mining still requires preparation and proper mining organization. Those who decided to make mining of digital assets the main type of their activity should be prepared to have start-up capital and at least some knowledge in the peculiarities of the technology to start mining.
It should not be forgotten that the future of cryptocurrencies is not yet completely determined, so a miner needs to stay alert to quickly react to changes in the market.