Cryptocurrency Mining is Not What It Used To Be…

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Cryptocurrency Mining is Not What It Used To Be…

As you know, cryptocurrencies operated on a blockchain platform must be mined. The power consumed by a bitcoin network equals Slovakia’s yearly consumption, which is 27.89 TWh. This figure grows month by month. Growing costs of consumed electricity in an expanding network must logically impact the mining. Let’s take a closer look at it.

How to mine crypto?

If you want to mine cryptocurrencies, you don’t have to bring a pickaxe. The tool you need is a computer. The era when mining was a job for desktop computers, however, is gone. Nowadays, you need the best graphical cards on the market. If you expected that you might mine a couple of bitcoins with your PC, I have to tell you, that you won’t.

Some people may find USB miner as a practical tool. Relevant is the hash-rate expressed in hash/sec. This unit determines the capacity of the graphical card or processor. At the time of writing the article, the total bitcoin network capacity was 10.1 EH/s (one quintillion bytes).

A well-known mining machine, Antminer S9

Mining includes the execution of mathematic operations used by miners for the verification of the correctness of the network transactions. The goal is to disable the duplication of the same bitcoin in separate operations. Each transaction contains a digital signature (public and private key), timestamp, hash functionality and all relevant info, which is the amount sent.

Using an algorithm, miners try to guess a special figure – the correct hash – that later becomes the identifier of the given block which is allocated to a blockchain i.e. mined. One block contains multiple transactions whose limit is derived from the size of a block (in bitcoin 1MB). The limit was set by Satoshi in 2020 to prevent hacking. The enlargement or removing of the limit is a hotly debated issue within the crypto community.

Miners are rewarded in the form of bitcoins for their “offering” of computing power (capacity) and the confirmation of each block. As of present, the reward amounts to BTC 12.50 for each mined block. After each 210 000 blocks, the reward is reduced by half. Next reduction is expected in nearly 3 years.

Is mining worth it?

Looking at the figures you may hesitate whether mining of coins still pays off. A good question. The answer is: Nope, it doesn’t. Currently, the mining of BTC is an extremely hardware-consuming effort and, even at minimal fees for electricity, a loss-making business. Everybody can use some calculator (to be found online) to calculate the costs. Competition among the miners is fierce and seeking of a correct hash may take even a year. Fortunately, a solution exists. It is a Czech made solution.

In 2020, Marek Palatinus founded a mining pool called Slush, to integrate individual miners with their computing capacities in order to boost their chances to identify and confirm a block. The profit is equally shared depending on the power of the offer. Today there are hundreds of such teams, the biggest ones are Slush, AntPool, F2Pool, BitFury, BW.COM, BTCC Pool, ViaBTC, GBMiners, BTC.com and BitClub Network.

A bitcoin farm used by miners in the USA

Cloud-mining offers you buying a certain share of a hash-rate to automatically receive some reward in your BTC wallet. You don’t have to buy hardware components at enormous costs. For a fraction of the cost, you can acquire part of the computing power of an existing “mine”. This, however, is a tricky business. By the way, do you know what Ponzi scheme means?

Plenty of firms offering cloud-mining are a typical Ponzi scheme not mining a single coin. Using a long-known “business model”, they suck money from traders until the business collapses. This doesn’t apply to Genesis mining or Hashing24, which are trustworthy companies in this business. Cloud-miming is never an absolutely safe undertaking. A scam is lurking from around every corner. It’s fair to say that like the traditional mining, cloud-mining is no longer a lucrative business, either. Yet, this case also has a solution. The good news number two:

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Mining of other cryptos than bitcoin

The infrastructure of Ethereum, Litecoin, Monero, Dash, Zcash and other coins is less developed than the one of bitcoin and as such more profitable. All information about the currencies, the mining process and the efficiency of mining is available here. You should also bear in mind that the value of the cryptos will grow. The rules of mining individual cryptos slightly differ, but the principle remains almost the same as for bitcoin.

In a nutshell: As far as we know, mining bitcoin does no longer pay off no matter how big or small the quantity is. There is only one alternative, cloud-mining. We will talk about it next time.

Author

More about the author J. Pro

Unlike Stephen (the other author) I have been thinking mainly about online business lately. I wasn’t very successfull with dropshipping on Amazon and other ways of making money online, and I’d only earn a few hundreds of dollars in years. But then binary options caught my attention with it’s simplicity. Now I’m glad it did because it really is worth it. More posts by this author

A Beginner’s Guide to Cryptocoin Mining

Is it worth your time to mine for cryptocoins?

Mining cryptocoins is an arms race that rewards early adopters. Bitcoin, the first decentralized cryptocurrency, released in early 2009. Similar digital currencies have crept into the worldwide market since then, including a spin-off from Bitcoin called Bitcoin Cash.

Which Alt-Coins Should Be Mined?

If you had started mining Bitcoins back in 2009, you could have earned thousands of dollars by now. At the same time, there are plenty of ways you could have lost money, too. Bitcoins are not a good choice for beginning miners who work on a small scale. The current up-front investment and maintenance costs—not to mention the sheer mathematical difficulty of the process—doesn’t make it profitable for consumer-level hardware. Today, Bitcoin mining is reserved for large-scale operations only.

Litecoins, Dogecoins, and Feathercoins, on the other hand, are three Scrypt-based cryptocurrencies that are the best cost-benefit for beginners.

Dogecoins and Feathercoins would yield slightly less profit with the same mining hardware but are becoming more popular daily. Peercoins, too, can also be a reasonably decent return on your investment of time and energy.

As more people join the cryptocoin rush, your choice could get more difficult to mine because more expensive hardware will be required to discover coins. You will be forced to either invest heavily if you want to stay mining that coin, or you will want to take your earnings and switch to an easier cryptocoin. Understanding the top 3 bitcoin mining methods is probably where you need to begin; this article focuses on mining “scrypt” coins.

Is It Worth It to Mine Cryptocoins?

As a hobby venture, cryptocoin mining can generate a small income of perhaps a dollar or two per day. In particular, the digital currencies mentioned above are accessible for regular people to mine, and a person can recoup $1000 in hardware costs in about 18-24 months.

As a second income, cryptocoin mining is not a reliable way to make substantial money for most people. The profit from mining cryptocoins only becomes significant when someone is willing to invest $3000 to $5000 in up-front hardware costs, at which time you could potentially earn $50 per day or more.

Set Reasonable Expectations

If your objective is to earn substantial money as a second income, then you are better off purchasing cryptocoins with cash instead of mining them, and then tucking them away in the hopes that they will jump in value like gold or silver bullion. If your objective is to make a few digital bucks and spend them somehow, then you just might have a slow way to do that with mining.

Smart miners keep electricity costs to under $0.11 per kilowatt-hour; mining with 4 GPU video cards can net you around $8.00 to $10.00 per day (depending upon the cryptocurrency you choose), or around $250-$300 per month.

The two catches are:

  1. The up-front investment in purchasing 4 ASIC processors or 4 AMD Radeon graphic processing units
  2. The market value of cryptocoins

Now, there is a small chance that your chosen digital currency will jump in value alongside Bitcoin at some point. Then, possibly, you could find yourself sitting on thousands of dollars in cryptocoins. The emphasis here is on “small chance,” with small meaning “slightly better than winning the lottery.”

If you do decide to try cryptocoin mining, proceed as a hobby with a small income return. Think of it as “gathering gold dust” instead of collecting actual gold nuggets. And always, always, do your research to avoid a scam currency.

How Cryptocoin Mining Works

The focus of mining is to accomplish three things:

  • Provide bookkeeping services to the coin network. Mining is essentially 24/7 computer accounting called “verifying transactions.”
  • Get paid a small reward for your accounting services by receiving fractions of coins every couple of days.
  • Keep your personal costs down, including electricity and hardware.

The Laundry List: What You Will Need to Mine Cryptocoins

You need eight things to mine Litecoins, Dogecoins, or Feathercoins.

  1. A free private database called a coin wallet. It’s a password-protected container that stores your earnings and keeps a network-wide ledger of transactions.
  2. A free mining software package, like this one from AMD, typically made up of cgminer and stratum.
  3. A membership in an online mining pool, which is a community of miners who combine their computers to increase profitability and income stability.
  4. Membership at an online currency exchange, where you can exchange your virtual coins for conventional cash, and vice versa.
  5. A reliable full-time internetconnection, ideally 2 megabits per second or faster.
  6. A desktop or custom-built computer designed for mining. You may use your current computer to start, but you won’t be able to use the computer while the miner is running. A separate dedicated computer is ideal. Do not use a laptop, gaming console or handheld device to mine. These devices just are not effective enough to generate income.
  7. An ATI graphics processing unit (GPU) or a specialized processing device called a mining ASIC chip. The cost will be anywhere from $90 used to $3000 new for each GPU or ASIC chip. The GPU or ASIC will be the workhorse of providing the accounting services and mining work.
  8. A house fan to blow cool air across your mining computer. Mining generates substantial heat, and cooling the hardware is critical for your success.

You absolutely need a strong appetite of personal curiosity for reading and constant learning, as there are ongoing technology changes and new techniques for optimizing coin mining results. The most successful coin miners spend hours every week studying the best ways to adjust and improve their coin mining performance.

Cryptocurrency Mining: What It Is, How It Works And Who’s Making Money Off It

NVIDIA Corporation (NASDAQ: NVDA)’s second-quarter earnings released earlier this month, though exceeding expectations, elicited cautionary reaction from the investor as well as analyst communities. Traders bid down the stock by over 5 percent on Aug. 11.

One of the reasons cited for the negative reaction was cryptocurrency contributing to much of the outperformance.

Why should it be a cause for alarm?

Analysts Blayne Curtis and Christopher Hemmelgarn of Barclays believes revenue stream from cryptocurrency is fickle. Therefore, the analysts were not in favor of assigning a multiple to it, as it has the potential to become an eventual headwind.

Rival Advanced Micro Devices, Inc. (NASDAQ: AMD) also had a similar tale to tell. The company indicated that cryptocurrency demand remains strong, while also suggesting that the demand might not last forever.

What Is Cryptocurrency?

Cryptocurrency, as the name suggests, is a form of digital money designed to be secure and anonymous in most cases. It uses a technique called cryptography — a process used to convert legible information into an almost uncrackable code, to help track purchases and transfers.

Giving a simple definition, Blockgeeks says it is just limited entries in a database no one can change without fulfilling specific conditions.

Cryptography is a technique that uses elements of mathematical theory and computer science and was evolved during the World War II to securely transfer data and information. Currently, it is used to secure communications, information and money online.

Cryptocurrencies allow users to make secure payments, without having to go through banks.

Some cryptocurrencies include bitcoin, Bitcoin Cash, Ethereum, DigitalNote, LiteCoin and PotCoin.

Bitcoin has the distinction of being the first cryptocurrency, having been introduced in 2009. Since then, this class of cryptocurrencies mushroomed, with more than 900 currently active.

How Cryptocurrencies Work

A cryptocurrency runs on a blockchain, which is a shared ledger or document duplicated several times across a network of computers. The updated document is distributed and made available to all holders of the cryptocurrency.

Every single transaction made and the ownership of every single cryptocurrency in circulation is recorded in the blockchain. The blockchain is run by miners, who use powerful computers that tally the transactions. Their function is to update each time a transaction is made and also ensure the authenticity of information, thereby ascertaining that each transaction is secure and is processed properly and safely.

As payment for their services, miners are paid physically minted cryptocurrency as fees by vendors or merchants of each transaction.

The value of the cryptocurrency fluctuates based on demand and supply, although there is no fixed value for it. Buyers and sellers agree on a value, which is fair and is based on the value of the cryptocurrency trading elsewhere.

Since there is no intermediary like bank involved in the transaction, as it is a peer-to-peer transaction, the transaction fee that is associated with credit cards is eliminated. The identity of the buyer and seller are not revealed. However, each and every transaction is made public to all the people in the blockchain network.

One can acquire a cryptocurrency through exchanges found online or trade it for traditional currencies.

Assume X wants to buy an item valued at $10,000 and he realizes that the seller Y accepts cryptocurrency, say bitcoin, as a form of payment. X scouts around to find the prevailing exchange rate, say $1,000 per currency. X gets Y’s public Bitcoin address from Y’s website, although both parties remain anonymous to each other.

X can now instruct his Bitcoin client or the software installed on his computer to transfer 10 bitcoins from his wallet to Y’s address. X’s Bitcoin client will electronically sign the transaction request with his private key known only to him. X’s public key, which is a public information, can be used for verifying the information.

When X’s transaction is broadcast to the Bitcoin network, it would be verified in a few minutes by miners. The 10 bitcoins will now be transferred to Y’s address.

Mining

Cryptocurrency mining includes two functions, namely: adding transactions to the blockchain (securing and verifying) and also releasing new currency. Individual blocks added by miners should contain a proof-of-work, or PoW.

Mining needs a computer and a special program, which helps miners compete with their peers in solving complicated mathematical problems. This would need huge computer resources. In regular intervals, miners would attempt to solve a block having the transaction data using cryptographic hash functions.

Hash value is a numeric value of fixed length that uniquely identifies data. Miners use their computer to zero in on a hash value less than the target and whoever is the first to crack it would be considered as the one who mined the block and is eligible to get a rewarded.

The reward for mining a block is now 12.5 bitcoins.

Earlier, only cryptography enthusiasts served as miners. However, as cryptocurrencies gained in popularity and increased in value, mining is now considered a lucrative business. Consequently, several people and enterprises have started investing in warehouses and hardware.

As enterprises jumped into the fray, unable to compete, bitcoin miners have begun to join open pools, combining resources to effectively compete.

Bank of New York Mellon Corp (NYSE: BK) has been running an internal blockchain platform for U.S. Treasury bond settlements since early 2020, a Marketwatch report quoting Morgan Stanley said. The private nature of the platform has kept it out of the regulatory purview. Once the bank decides to roll it out to clients and use it commercially, regulatory oversight might come into the picture.

A complete mining kit consists of graphics cards, a processor, power supply, memory, cabling and a fan, which would cost between $2,400 and $3,800 on Amazon.com, Inc. (NASDAQ: AMZN), according to Bloomberg.

The top three mining hardware, according to 99bitcoins.com, are Avalon6, AntMiner S7 and AntMiner S9.

Given that existing GPUs aren’t powerful enough, now miners are flocking to application-specific integrated circuits, or ASICs. To circumvent this shortcoming, Nvidia and AMD are said to be working on GPUs, which could be used specifically for the purpose.

The two companies who are dominant in consumer-grade mining hardware are Canaan and Bitmain. Bitmain, based in Beijing, does mining as well as manufactures mining hardware.

Mining Pools And Their Share Of Mining

Source: Block Chain

Mining pools are concentrated in China, which boasts of 81 percent of the network hash rate.

Why Mining Chips Are A Fickle Revenue Stream

For companies such as AMD and Nvidia, which have dominant positions in the gaming chip market, a focus away from their core business may not be a prudent course of action.

As seen, these companies may have to bring out new GPUs designed exclusively for this purpose to pose a real threat to the ASIC chips, which are predominantly manufactured by the Chinese, who are notorious for their low-cost market positioning. How viable is the spend on such exclusive chips is a moot point.

Additionally, national governments and exchanges are mulling over regulation of the whole realm of cryptocurrencies. Japan has recently introduced legislation to protect users after Tokyo-based Bitcoin exchange Mt Gox collapsed in 2020. Similarly, introducing taxation such as capital gains tax on Bitcoin sales may also impede the cryptocurrency industry.

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