Is Cryptocurrency Mining Dead?
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Let’s talk about cryptocurrency mining today.
If you are a cryptocurrency enthusiast you are most probably well aware of the concept. However, have you heard that cryptocurrency mining might be coming to an end? Do you know what’s the reason and what are the alternatives? Let’s find out!
Mining is basically the process of validating other people’s transactions by using computing power. After that process, you add them to the long, public list of all transactions, also known as the blockchain. In exchange for the validation, the “miner” is rewarded with cryptocurrency.
Who can become a miner?
Technically, anyone with a computer and an Internet connection can become a miner. However, there are a lot of things to consider before you get so excited about it.
First of all, mining is not always profitable. Depending on which cryptocurrency you’re mining or how fast and powerful your computer is, as well as the cost of electricity in your area, you might end up spending more money on mining than you earn back in cryptocurrency.
How rewarding it is?
As mentioned, cryptocurrency mining is performed by high-powered computers. They usually have to solve a rather complex computational math problem (they can’t be solved by hand) and that’s why a lot of electricity and hardware power is needed.
Mining needs a computer and special software, which helps miners compete with their peers in solving mathematical problems.
Saying that, you also need a little bit of luck. Your computer should be both powerful and lucky at the same time. Think of it this way - the probability of solving one of these complex problems and end up getting a reward is like finding gold while digging in a sandbox. The odds of a computer solving one of these problems is 1 in 6 trillion. You are also competing with millions of other computers out there who are after the same prize.
The results of mining are two:
- When computers solve these math problems on the crypto network, they produce new coins.
- By solving computational math problems, miners make the cryptocurrency network trustworthy and secure, by verifying its transaction information.
Another thing to remember is that individual blocks, added by miners, should contain a proof-of-work, or PoW.
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.
Bitcoin mining case study
Let’s take Bitcoin as an example, for a second. The block reward is basically how new Bitcoin is created or brought into the economy. Every 10 minutes, a “block” of Bitcoin transactions is solved by miners and added to the blockchain.
In the beginning, the reward miners got for mining a block on the Bitcoin network started at 50 BTC. This means that every 10 minutes somebody, somewhere was getting 50 Bitcoins. Back then, things were different, though. BTC was worth pennies and you could mine it using only your laptop. However, every 210,000 blocks, the reward halves. Over 80% of all Bitcoin is mined. The next “halving” is expected to take place in May, 2020. Change of price and volatility afterwards are expected to occur.
In the beginning, only cryptography enthusiasts served as miners. However, as cryptocurrency started to gain popularity and eventually increased in value, mining turned into a lucrative business. Enterprises started investing in warehouses and expensive hardware, and Bitcoin miners joined opened pools, combining their resources.
However, as time went by, a lot of different issues started to pile up, generating a serious discussion among the cryptocurrency community whether mining is slowly coming to an end. Let’s try to find out what’s going on and what factors contributed to the decline of cryptocurrency mining.
Is cryptocurrency mining dead?
Well, it’s not, yet. However, we can’t overlook the following negatives:
- Heat and Noise, coming from expensive and powerful computing equipment.
- You need a lot of money to buy mining equipment.
- Risk of fire. Fire is something to consider and you need to fully understand how much electricity you will be using and the capacity of your location.
- Taxes. You need to report all your earnings.
Which led to…
- Mining profits are consistently reported as low.
- Nvidia reported lower earnings than what was anticipated from crypto mining by the CEO and investors.
- The value of cryptocurrencies has dropped, making it difficult for miners to break even on electricity costs.
- The cryptocurrency mining boom brought a high demand for hardware, which enticed resellers to take advantage of the situation and jack up their prices.
- Ethereum and other networks are moving to POS (Proof of Stake) that eliminates mining.
- Tariffs for importating ASIC (mining machines) have risen as well.
What are the realistic advantages of mining?
- You can still make money. Of course, that’s it if your electricity costs are low, you have the right equipment and you are mining the right cryptocurrency.
- It’s fun for people who are geeking over computers and love messing around and playing with hardware and computer equipment.
Along with, of course, all the advantages that come with cryptocurrencies, which you can eventually end up with at the end of your mining activities. Some of those include:
- High levels of privacy
- Stored in a digital wallet
- Fast and cheap transactions
- Universal level recognition
- Access to everyone
Should I go for mining?
So, should you start mining in 2019 (or continue if you’ve been doing this for some time)? Well, the response entirely depends on the final goal you have in mind. For instance, if you are interested in mining for fun or educational purposes, then go for it. However, if you want to make money, cryptocurrency mining might not be the best thing for you at this point.
It all comes down to potential risks and rewards. Looking at things objectively, the risks and disadvantages outnumber the upsides of mining at this point.
The biggest thing that impacts mining profitability is the price of any cryptocurrency you are interested in mining. However, think about something else. The more miners begin mining and the more it becomes profitable, the more difficult it will become. Keep in mind that it’s designed this way. Increasing the difficulty of the mathematical equations and halving the rewards at specific times sounds to many crypto enthusiasts like a no-win situation.
Another thing you can do is look for cryptocurrencies that are worth mining and that might actually bring you some profits. Use your mining gear to mine new coins that are easier to mine than Bitcoin. Especially if those new coins have something extra special that may make them go up in the future. There are so many unique cryptocurrency coins coming out these days, each with unique features and possibilities.
Still, if you’re interested in Bitcoin, allocate a percent of your income to buying Bitcoin.
This is a better alternative than Bitcoin mining since it has become increasingly centralised in the past couple of years, leading to concerns about its future.
If you’ve given up on mining Bitcoin, sell your hardware and buy a new one to mine alternatives such as Dash or Monero.
What are the alternatives to mining?
If you’re interested in Bitcoin, for example, but are looking for alternatives to mining, you can just purchase Bitcoins or enter a lease contract with a Bitcoin Mining Company which will give you a percentage every month. This way, you will still get a benefit of rising prices of Bitcoin and you don’t have to do anything at home.
What else can you do?
If you still want to be part of the cryptocurrency community but after everything you’ve read so far, you don’t think mining is a good option for you, there are several things you can do to get cryptocurrencies.
- Sign up for an ICO: ICOs are a new way of raising capital to fund new businesses. The value of the new coin is tied to the overall value of the company. There is an initial up-front cost for buying but there are many lucrative bonuses. You can buy in with your existing cryptocurrency as well.
- Taking surveys: Taking surveys became a very popular method to earn free cryptocurrency. There are multiple websites and applications you can download that will pay you in cryptocurrency for taking surveys.
- Airdrops: Some wallets offer airdrops in addition to free crypto offers for creating a wallet on their platform. You don’t have to do anything except have a specific wallet to participate in an airdrop. This is a highly engaging and effective strategy to gain more users and give existing ones free crypto.
A lot’s been happening in the cryptocurrency world and things are changing and transforming as we speak. Crypto mining is just one of the aspects that’s experiencing a considerable shift. Is crypto mining dead, though?
Huge mining farms can proliferate only where they are profitable, which is in areas where electricity costs are low. This makes crypto mining centralised.
Individual miners are complaining that they barely get half of what they used to when they first started. Their investments in hardware can’t be earned back and little by little mining pulls away from individuals and goes directly to huge corporations and institutions.
Not just that but with the environment became too competitive. As prices skyrocketed, more and more miners got into the game and more transactions began occurring all over the world. Due to competition, it might take years for your home equipment to validate just one block of transaction.
Further to that, Ethereum and other cryptocurrencies are withdrawing from ASIC miners and moving to Proof of Stake, which eliminates mining.
This is a trend that many think will continue due to risks of 51% attacks and an actual possibility of miners potentially controlling a coin.
You’ve heard a lot about mining today. It’s up to you and your goals to decide whether mining is something you see yourself doing in the future or not.
Remember, the crypto space is evolving and you have to evolve with it. Maybe the time to sell your mining equipment and invest in crypto some other way has come.
Thank you for reading our article.
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